Types of Private Equity Funds: Capital Funds, Venture Funds, and More Explained

Last updated: September 7, 2026.

Quick Answer

Private equity is an umbrella term for seven main fund types with different targets and risk profiles. Capital funds, also called buyout funds, acquire established, cash-generating companies using leverage and carry the lowest risk, while venture funds back early-stage companies with high risk and high potential return. Growth capital sits between the two, distressed funds buy struggling companies, funds of funds spread capital across other funds, and real estate and infrastructure funds hold physical assets. Aleta's private markets reporting tags every commitment by fund type so exposure can be compared across the whole portfolio.

Key Takeaways

• Capital (buyout) funds and venture funds are the two most common private equity fund types, at opposite ends of the risk spectrum.

• Capital funds typically finance up to 80% of an acquisition with debt, which is why the strategy is called a leveraged buyout.

• Private equity makes up 18% of the average family office portfolio, 8% through direct investments and 10% through funds, inside a total alternatives allocation of 42% (UBS).

• Global buyout deal value rose 44% to $904 billion in 2025 and exit value rose 47% to $717 billion (Bain).

• Infrastructure was the fastest-growing fundraising category in 2025, up 58% year over year, while buyout fundraising fell 16% (Bain).

• A fund of funds offers broader diversification at the cost of a second layer of management fees.

Why Does the Type of Private Equity Fund Matter?

Investing in a capital fund, a venture fund, or a fund of funds are three very different decisions, with different risk levels, time horizons, and fee structures.

Deciding to invest in private equity is only the first step, in the same way that deciding to buy bonds does not tell you which bonds. You need to figure out what specific investments you want to make. Which ones fit your strategy, your values, and your overall situation and investment time horizon.

There are several kinds of private equity funds, and one of the first steps in your private equity journey should be figuring out which type of fund is the right one for you to invest in.

Some funds invest in startups, others in more established companies. Some focus on tech companies, while others invest in infrastructure like toll roads, bridges, airports, and others in entirely different areas.

Some private equity firms cater to larger investors, some to smaller ones, and there are variations in the level of seriousness among different firms.

Read on to learn about the various fund types, what they invest in, their goals and the level of risk typically associated with each kind.

Let's dive right in and begin with one of the most popular funds; the capital fund, also known as a buyout fund.

(Tip: It kills me to say it, but if you just want a quick overview of the different fund types, you can scroll down to the comparison table near the end of the article.)

What Is a Capital Fund (Buyout Fund)?

Capital funds are the lowest-risk corner of private equity because they buy businesses that already make money.

So, what is a capital fund?

It's a fund that acquires already established companies lacking the necessary capital to unfold their full potential. These companies are often stable, non-cyclical businesses with a steady cash flow. As a result, there is generally a lower risk associated with investing in capital funds compared to, for instance, venture funds.

The fund either borrows up to 80% of the acquisition price from the bank, using the acquired company's assets as collateral for a loan that is repaid through the company, or finances 80% of the acquisition price through leveraged loans.

Capital funds acquire already established companies lacking the necessary capital to unfold their full potential.

The remaining part of the acquisition price is covered by the capital fund's own resources. This method is known as Leveraged Buyout (LBO) and reduces the risk for the capital fund and its investors since they haven't paid the full acquisition price with their own funds.

The additional borrowed capital enables the fund to acquire larger companies than it could have without that extra capital. This, in turn, provides the fund (and its investors) with the potential for a higher return if the investment turns out successful.

A capital fund actively engages with their acquired companies to ensure their success. By buying a majority stake in the companies or acquiring them entirely, the fund can control the companies' strategy and restructure management or other parts of the companies, if they find that it's needed to unfold the company's full potential.

Buyout remains the industry's largest segment: Bain reports that global buyout deal value rose 44% to $904 billion in 2025, with exit value up 47% to $717 billion.

What Is a Venture Fund?

In contrast to capital funds, venture funds invest in smaller, new companies in the early stages of their life cycle, perhaps consisting only of a good business idea.

For a venture fund to invest in a company, they must have a strong belief that the company has a significant growth potential, strong leadership, and a unique product.

Private equity funds are a vital source of capital for these types of companies since they rarely can borrow a substantial amount from the bank, due to the relative uncertainty of their future. With capital from a venture fund, these companies have a much better chance at unleashing their potential.

Considering the life phase of these companies, there is a relatively high risk associated with investing in them. On the other hand, there is an opportunity to achieve very high returns if the company becomes successful.

Unlike capital funds, venture funds often buy a minority stake in the companies they invest in, allowing control to remain with the company's own management. However, the fund often helps the company by connecting them with individuals in their network who can assist the company in growing through mentorship or other means.

Many are unaware of how many companies have received capital from venture funds. Some well-known companies that have achieved great success after receiving resources from venture funds include Facebook, Twitter, PayPal, and Airbnb.

What Is a Growth Capital Fund?

Growth capital is the middle ground of private equity risk.

The strategy of growth capital funds closely resembles that of venture funds, but they invest in companies that are a bit further along in their life cycle and are already profitable.

The goal of a growth capital fund is to provide the company with the last capital injection it needs to truly become a success.

These companies are more expensive to invest in because they've already realized a part of their potential and are more stable than venture funds.

The goal of a growth capital fund is to provide the portfolio companies with the last capital injection they need to truly become a success.

There is a lower risk associated with investing in growth capital funds than in venture funds since they are more stable. But since there's already an indication of how successful the portfolio companies can be in the future, there's not the same probability of overwhelming success as there is for the companies in which venture funds invest.

What Is Distressed Funding?

Funds that employ the distressed funding strategy invest in companies that underperform and are in serious financial trouble or may have even gone bankrupt.

The goal of the investment is either to turn the company's situation around and make it a success, or to sell its physical or intellectual assets, such as buildings, machines, or patents, at a profit. The method is therefore also less flatteringly referred to as vulture financing.

In the aftermath of the financial crisis, this strategy became more widespread as many companies faced financial problems or went bankrupt.

What Is a Fund of Funds?

As the name suggests, this type of fund invests in a range of other private equity funds and does not directly invest in companies.

The advantage of this method is that, as an investor in a fund of funds, you achieve a higher risk diversification and more investment opportunities than you would with an investment in a single fund that invests directly in companies.

On the other hand, a larger part of your investment goes to management fees, as with this method, you pay for multiple layers of management.

What Are Real Estate Funds and Infrastructure Funds?

There are also funds that only invest in real estate and land or infrastructure such as toll roads, airports, bridges, green energy, etc. Infrastructure has become the growth story of the category, with fundraising up 58% in 2025 while buyout fundraising fell 16%, according to Bain. These holdings are also the ones general-purpose portfolio tools handle worst, which is why Aleta's alternative assets reporting treats real estate and infrastructure as first-class asset types alongside fund positions.

How Do the Types of Private Equity Funds Compare?

As you can see, private equity is an umbrella term covering many different types of investments. While they all share the commonality of investing in the private market, they do so with different strategies.

In practice most family offices hold several of these types at once, which is where Aleta's private markets reporting earns its place, tagging every commitment by fund type and strategy so exposure and performance can be compared across the whole private portfolio.

Do You Have an Accurate Overview of Your Total Unfunded Commitment?

Private equity now accounts for 18% of the average family office portfolio, 8% through direct investments and 10% through funds, and most offices hold open commitments to several funds at once (UBS Global Family Office Report 2026).

The funds you have invested in can, in principle, demand the rest of your commitment at any time. Therefore, it is essential always to have an overview of all your unfunded commitments.

And now, just a few lines of self-promotion (bear with me).

We have extensive experience in private equity reporting and a thorough understanding of how the big private equity firms report, accumulated over many years of working with their statements.

Aleta's private markets forecasting gives you an ongoing, accurate overview of your unfunded commitments across all funds and models when capital calls and distributions are likely to land, 12 to 24 months forward. This way, you always know precisely how much the various funds can call from you, individually and collectively, and how each is performing.

Drop a line if you have any questions about our reporting or about the article!

We have extensive experience in private equity reporting and a thorough understanding of how the big private equity firms report, accumulated over many years of working with their statements.