What are primary funds in private capital?

Primary funds in private capital refer to investments made into newly formed private equity funds. This type of investment allows investors, often referred to as limited partners, to commit capital to a fund that is in its fundraising stage. These funds typically invest in promising private companies and aim for significant returns by helping those businesses grow and eventually exit through various means such as public offerings or sales to other firms.

The focus on newly formed private equity funds is significant because the capital raised is essential for the fund's ability to make future investments. Investors in primary funds often engage in the due diligence process to evaluate the fund managers' strategies, past performance, and the overall market conditions before committing their capital. This aligns the interests of investors with the fund managers, as both seek to generate strong investment returns over time.

In contrast, the other options focus on different types of financial activities that do not pertain directly to primary funds. Investments into distressed companies would involve special situations or turnaround strategies, while investments that target existing limited partner interests refer to secondary market transactions. Finally, investments through direct public offerings relate to companies issuing shares directly to the public, which falls outside the scope of private equity funds altogether.