CFA Level I · CFA Level I Exam · Alternative Investment Performance and Returns
A private equity fund invests directly in the shares of established, mature private companies, often using substantial borrowed money to finance the acquisitions. This strategy is best described as:
The strategy is best described as a leveraged buyout. Buyout funds purchase established, mature companies and finance much of the price with borrowed funds. Venture capital instead backs early-stage companies, and distressed debt investing targets securities of financially troubled issuers.
- Aventure capital
- Ba leveraged buyoutCorrect
- Cdistressed debt investing
Explanation
Buyout funds acquire mature companies, commonly financing with high leverage, which is a leveraged buyout. Venture capital targets early-stage firms with little debt. Distressed debt involves securities of troubled issuers.
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