A-I

Blind pool

A private equity fund where investors commit capital without knowing the specific investments the fund will make.

Capital call

A request from the GP to the LPs to transfer a portion of their committed capital to the fund in order to make an investment or pay expenses.

Capital distribution

A payment from the GP to the LPs from the proceeds of selling a portfolio company or asset or receiving dividends or interest income.

Carried interest

The share of the fund’s profits that the GP receives as an incentive for performance, typically 20% of the total profits after returning the capital invested by the LPs.

Co-investment

An opportunity for LPs to invest directly alongside a private equity fund in a specific portfolio company, offering potentially higher returns but also greater risk.

Distressed investing

A private equity strategy that focuses on acquiring companies in financial difficulty with the potential to restructure and improve them for future profitability.

Due diligence

The process of evaluating an investment opportunity by conducting financial, legal, operational, and market analysis of a potential portfolio company or asset.

Exit strategy

The plan for realizing the return on investment from a portfolio company or asset by selling it to another investor, taking it public, or recapitalizing it.

Fund size

The total amount of capital that a private equity fund raises from its LPs and can invest in portfolio companies or assets.

General partner (GP)

The manager of a private equity fund who makes investment decisions, oversees portfolio companies, and charges fees and carried interest to the LPs.

Hold period

The average time a private equity fund holds onto its portfolio companies before exiting them through a sale, IPO, or other means.

I-R

Internal rate of return (IRR)

A measure of the annualized return on investment that a private equity fund generates for its LPs, calculated by discounting the cash flows from capital calls and distributions to their present value.

J-Curve

A performance pattern sometimes seen in private equity where the fund’s value initially declines due to investment expenses before rising as portfolio companies are improved and eventually sold.

Leveraged Buyouts (LBOs)

A leveraged buyout (LBO) is a financial strategy used by private equity firms or investors to acquire a company using a combination of debt and equity financing. LBOs are often used to acquire mature, cash-generating companies with strong assets and stable cash flows.

Limited partner (LP)

An investor who provides capital to a private equity fund and receives a share of the fund’s profits, but has limited liability and involvement in the fund’s operations.

Lock-up period

A contractual restriction that prevents LPs from withdrawing their capital from a private equity fund for a set period, typically 3-5 years.

Management fee

The annual fee that the GP charges to the LPs for managing the fund, typically 2% of the committed capital or the net asset value of the fund.

Management fee holiday

A period at the beginning of a private equity fund’s life where the GP waives the management fee to incentivize investors and compensate for initial expenses.

Multifamily syndication

A method for raising capital to invest in multifamily real estate properties by pooling funds from multiple investors through a partnership structure.

Multiple of invested capital (MOIC):

A measure of the total return on investment that a private equity fund generates for its LPs, calculated by dividing the cumulative distributions by the cumulative capital calls.

P-Z

Private equity

A form of alternative investment that involves buying and selling stakes in private companies or assets, often with the use of debt financing.

Secondary market

A marketplace for buying and selling existing interests in private equity funds, allowing investors to exit their positions before the fund’s full life cycle.

Subscription agreement

The legal contract outlining the terms and conditions for an investor’s commitment to a private equity fund, including capital contribution and rights.

Valuation

The process of estimating the current or future worth of a portfolio company or asset based on various methods such as discounted cash flow, comparable transactions, or market multiples.

Vintage year

The year in which a private equity fund makes its first investment, which is used as a reference point for comparing the performance of different funds.