Hedge Fund vs. Private Equity Fund: What's The Difference?

Hedge funds and private equity funds are both extremely popular investment vehicles, especially among high-net-worth individuals, and both types of funds frequently make the news.

That said, many people are not clear on the significant distinctions between private equity and hedge funds and how those differences affect fund structure, investments, and returns. Here is a basic overview of the differences between a hedge fund vs. a private equity fund.

What Is a Private Equity Fund?

A private equity fund is a means for investors to buy equity and securities that are not available for public trading. A private equity fund typically commits a large amount of money for a long period of time in exchange for equity ownership of a firm. These funds are often used to bring a startup to an IPO or to convert a public company into a private one. Private equity funds typically earn better returns than stocks.