What characterizes a primary private equity investment from the LP perspective?

A primary private equity investment from the limited partner (LP) perspective is characterized as the initial investment in a private equity fund. This refers to the commitment made by LPs when they decide to invest capital into a newly established private equity fund. This initial investment is critical as it provides the necessary capital for the fund manager to deploy into various portfolio companies and drive the fund's investment strategy.

This type of investment allows LPs to gain exposure to a diversified portfolio of companies managed by the private equity firm. By committing capital to a primary fund, LPs become stakeholders in all future investments that the fund makes, benefiting from the potential for high returns as the fund grows and exits their investments favorably.

In contrast, a secondary sale involves buying or selling existing stakes in a private equity fund rather than making a direct commitment to a new fund. Cash-out deals typically refer to situations where investors realize their investments, and direct investments in portfolio companies occur outside the context of a fund structure, which doesn't align with the concept of primary investment. Thus, understanding the nature of primary investments is essential for LPs navigating private equity investments.