What's going on?

On Monday, Swedish private equity firm EQT Partners announced it was planning an initial public offering (IPO) that would see it sell $880 million worth of shares � representing around a fifth of the company � to public equity investors.

What does this mean?

EQT looks after money for other big investors like pension companies and sovereign wealth funds. It typically uses their cash to either buy large stakes in existing private companies, or else take over and �delist� those with publicly traded shares. The hope is that it can improve financial performance and sell the businesses on for a profit.

EQT currently manages $45 billion of investor money, making it one of Europe�s (and the world�s) largest private equity companies. It�s now looking to expand further by selling a combination of new and existing shares that value the Swedish firm at a cool $4.5 billion.

Why should I care?

For markets: Public private equity has a mixed record.
EQT is aiming to IPO in the next month or so, although it says it�s not worried about deteriorating economic conditions potentially making share ownership less attractive. It�s been years since a private equity firm listed shares, and some have expressed regret about opening their businesses up to greater regulatory scrutiny � and to investors who don�t quite �get it�. After years of their shares underperforming the broader stock market, several are now changing their organizational structure to become eligible for inclusion in share indexes which could significantly boost their ownership base.

For you personally: Watch out for smoothies.
Several studies have shown that, once you�ve factored in pricey management and success fees, private equity�s returns often don�t differ that much from public stock markets�. Currently, direct investment in a private equity fund is only available to big investors, but that may soon change. Still, those thinking of investing in such companies� stock should also remember to watch out for valuation �smoothing� that can make the riskiness of their private equity investments look artificially low.