In the context of private equity, what does the term 'liquidation' refer to?

Liquidation, in the context of private equity, refers to the process of selling a fund's assets. When a private equity fund reaches its end of life or a specific point where the investment strategy dictates the need to divest, it will begin the liquidation process. This involves distributing the proceeds from the sale of these assets to investors. The goal is to convert illiquid investments into cash, which can then be returned to the fund's investors as part of their exit strategy.

This process is crucial for investors because it is how they realize a return on their capital. After the assets are sold, the funds from the liquidation go to the investors, reflecting the success of the investments made by the private equity fund during its operational period. Understanding this process is essential for your grasp of private equity operations and investor relations.