Which of the following statements is true regarding private equity funds?

Private equity funds often leverage financial instruments to enhance returns is an accurate assertion. These funds usually use a mix of debt and equity in their investment strategies, allowing them to acquire larger stakes in companies than they could with only their own capital. By utilizing leverage, private equity firms can amplify their potential returns on investment when the companies they invest in perform well. This strategy is essential in private equity since it allows them to pursue more aggressive growth or turnaround plans, ultimately aiming for significant appreciation in the value of their portfolio companies before an exit, such as a sale or an Initial Public Offering (IPO).

The other options present concepts that do not accurately reflect the operational nature of private equity funds. Private equity funds primarily focus on investing in privately held companies, although they may target public companies for buyouts with the goal of taking them private. They do not typically work primarily with government entities, as their focus is on generating returns from private market transactions rather than public sector initiatives. Moreover, these funds are known for their long-term investment horizons, often holding investments for several years to implement changes and realize value, contrasting with a focus on short-term investments.