Difference Between Private Equity & an Investment Group

As the name implies, an investment group comprises at least two individuals with the shared goal of investing in a project that will yield profit. PE, on the other hand, need not be a collective effort. Although PE is often drawn from groups of retail and institutional investors and put into a PE fund, PE capital also can come from a single Angel Investor -- an individual who has a lot of money to invest.

PE contributors often are seasoned investors, or at bottom, wealthy individuals prepared to make high stakes investments for a high reward. Some PE funds have a $250,000 minimum investment, and others can require $1 million. Such high minimums are rare for investment groups. While investment groups might contain savvy investors and individuals with a healthy amount of investment capital, investment group members are more likely novices with more modest means.

While the goals of investment groups vary, most members are simply looking for an effective way to learn about the market and make money while doing it. PE investors, on the other hand, are usually focused on acquiring equity ownership in company, if not complete control, in addition to monetary gain. It is likely that companies that receive PE funding have boards of directors comprising PE investors. An investment group’s ability to obtain a comparable level of control is much less likely.

Investment groups can deal in any sort of assets they chose: shares or similar securities traded on the stock market, private companies, real estate or general business, for example. PE, on the other hand, has a narrower scope. Unlike investment group capital, PE is reserved for companies that are not traded on the stock exchange or for buyouts and the subsequent delisting of public companies. In other words, PE is used to invest in either private companies or public companies with the intention of taking them private.