PE is not one strategy. It is a label that covers buyouts, growth equity, venture capital, private credit, infrastructure, and real assets — each with different deal sizes, return profiles, and professional cultures. Mixing them up is the surest sign of an outsider.
Buyouts: control + leverage + time
A buyout fund acquires a controlling stake — usually 100% — in a mature, cash-generative business, finances most of the purchase price with debt, and underwrites a 4–7 year operating plan. The targets are companies whose unit economics already work but whose growth, margin, or balance sheet can be improved under new ownership. The return architecture is the famous returns bridge: multiple expansion, EBITDA growth, and debt paydown in some combination. This is the Bain, Blackstone, KKR, and Apollo flagship strategy.
Within buyouts there is a sharp distinction between large-cap (deals over $1B), middle-market ($100M–$1B), and lower-middle-market (under $100M). Each has its own sourcing patterns, its own debt providers, and its own competitive dynamics.
Growth equity: minority, cash-flow positive, scaling
Growth equity sits between late-stage venture and small-cap buyout. The companies are profitable or near-profitable, growing 20–50% per year, and the investor takes a minority position with significant governance rights but not formal control. Insight Partners and General Atlantic built the modern playbook here. Returns come from revenue compounding rather than leverage.
Venture: power-law returns from earliest signals
Venture capital invests minority equity in pre-product or pre-scale companies in exchange for the right to participate in a power-law outcome. The math is structurally different — most investments fail, and the fund is carried by one or two outliers per vintage. Chapter 3 walks the venture sub-ecosystem in detail.
Venture economics are different too: shorter operating involvement, lighter governance, and a willingness to lose 100% on bets where the upside is 50–200x.
Private credit: the lender's seat at the same table
Private credit funds (direct lending, mezzanine, distressed) lend to many of the same companies PE funds buy. Returns are coupon-driven (8–12% gross unlevered for senior direct lending; higher for mezzanine and unitranche). The growth of private credit since 2010 has reshaped buyout debt markets — the largest private credit shops now underwrite buyout financings the broadly-syndicated loan market can't or won't price.
Infrastructure and real assets
Infrastructure and real assets — toll roads, midstream pipelines, fibre networks, renewable generation, real estate — are managed inside PE platforms because they share a key feature: long-term contracted cash flows that institutional LPs want for inflation hedging and liability matching. The return profile is more bond-like than equity-like, with target IRRs in the 8–14% range and longer fund lives (12–25 years for some core infrastructure).