As a hybrid of debt and equity, preferred equity is often simplistically perceived as a proverbial “jack of all trades, master of none.” That malleability is a benefit, however, particularly as it made preferred equity a go-to source of rescue capital at the height of the pandemic. Having piqued the curiosity of sponsors as a fast and efficient option in a crisis, many are now exploring other ways to incorporate preferred equity into their normal operations. The features and applications of preferred equity were addressed at length in a recent Private Equity Law Report webinar, entitled “The Growth of Preferred Equity As a Liquidity Solution in Three Contexts,” moderated by Rorie A. Norton, Editor of the Private Equity Law Report, and featuring Simpson Thacher partner Peter H. Gilman and Proskauer Rose partner Michael R. Suppappola. This first article in a two-part series offers a holistic explanation of the facets of preferred equity and considerations for fund-level issuances for LP liquidity, follow-on acquisitions and rescue capital for struggling portfolio companies. The second article will examine how preferred equity can be used by sponsors and LPs to obtain liquidity, as well as various emerging trends as the asset class develops. For additional insights from Gilman, see our two-part series on legal issues with minority stake transactions: “Negotiation Points for Both Parties and Key Conflicts of Interest to Avoid” (Jul. 23, 2019); and “Important Structural Considerations and Managing Limited Liquidity Options” (Jul. 30, 2019).