Capital raised, often from institutional investors, for investment with a view to profitable returns for both those investors and the firm that raised the capital (often referred to as a private equity house). The capital raised is usually held within a fund established to invest predominantly in unquoted securities, rather than in publicly quoted securities or government bonds. Such funds are often structured as limited partnerships and seek to invest over the medium to long term.

The term also refers to a range of corporate finance transactions undertaken by a private equity house. The scope depends in part on geographic region. In Europe, private equity covers the entire range of transactions undertaken by the investment sector, such as management buyouts and management buy-ins. It also encompasses venture capital, although this is increasingly been as separate to private equity, in line with the US approach.