Private equity investment funds generally use convertible securities as financial instruments for investment. Convertible securities include convertible preferred stocks and convertible bonds.

Convertible preferred stock is one of the most important investment methods for private equity investment funds. Private equity investment funds, especially financial equity investment funds, generally set up convertible preferred shares, that is, the holders of preferred shares are allowed to convert preferred shares into a certain number of common shares under certain conditions.

Convertible bond is a kind of bond that can be converted into the shares of the bond issuing company, which is usually lower in coupon rate. In essence, convertible bonds are based on the issuance of corporate bonds, with an option that allows buyers to convert their purchased bonds into shares of designated companies within a specified time limit.