Glossary30 terms

Private-markets terms, A–Z.

Short, plain definitions. Each term has its own link you can share.

C

Capital call: A GP's request (drawdown) for LPs to fund part of their commitment, typically on 10 business days' notice.
Carried interest: The GP's share of fund profits (commonly 20%), usually paid after LPs receive their capital and a preferred return.See also: Hurdle rate · Distribution waterfall · Clawback
Clawback: A provision requiring the GP to return carried interest received in excess of what it is entitled to over the fund's life.
Co-investment: An LP investing directly in a portfolio company alongside a fund, typically with reduced or no fees and carry.
Commitment: The total amount an LP agrees to invest in a fund over its life, drawn down through capital calls.
Commitment pacing: Planning how much an LP commits to new funds each year to reach and keep a target private-markets allocation.See also: Denominator effect · Vintage year
Continuation vehicle: A new fund, managed by the same GP, that buys one or more assets from an existing fund; existing LPs can take cash or roll their interest into the new vehicle.See also: GP-led secondary · LPAC · Fairness opinion

Deferred consideration: Part of a secondary purchase price paid at agreed later dates rather than at closing.
Denominator effect: When public-market falls shrink a portfolio's total value, pushing the private-markets share above target even though private holdings haven't changed.
Discount to NAV: The difference between a secondary purchase price and the reported NAV, usually quoted as a percentage of NAV.
Distribution waterfall: The order in which fund proceeds are split: return of capital, preferred return, GP catch-up, then the carry split. Can be whole-fund ("European") or deal-by-deal ("American").
DPI: Distributions to paid-in capital: cash returned to LPs divided by capital they have paid in.See also: TVPI · IRR · MOIC
Dry powder: Committed capital that has not yet been called or invested.

Fairness opinion: An independent adviser's opinion that a transaction price is fair from a financial point of view, commonly obtained in GP-led deals.

GP stakes: Minority equity interests in private-markets management firms, giving the investor a share of fees, carry and/or balance-sheet returns.
GP-led secondary: A secondary transaction initiated by the fund manager (GP), e.g. a continuation vehicle or tender offer, rather than by an investor selling its stake.See also: Continuation vehicle · Tender offer · Strip sale

Hurdle rate: The preferred return (often 8% a year) LPs must receive before the GP earns carried interest.

IRR: Internal rate of return: the annualised discount rate that sets the net present value of a fund's cash flows to zero; sensitive to timing.

J-curve: The typical pattern of negative early returns (fees, costs, unrealised investments) followed by gains as investments mature and are exited.

LP-led secondary: A sale by a limited partner of its interest in one or more funds (often a portfolio of fund stakes) to a secondary buyer.See also: Discount to NAV · Deferred consideration
LPAC: Limited Partner Advisory Committee: a group of LPs that the GP consults on conflicts of interest and certain consents, such as GP-led transactions.

Management fee: An annual fee paid to the GP, commonly a percentage of commitments during the investment period and of invested capital afterwards.
MOIC: Multiple on invested capital: total value of an investment divided by the amount invested.

NAV (net asset value): The reported value of a fund's investments less its liabilities, usually marked quarterly by the GP.
NAV lending: Borrowing at the fund level secured against the value of the fund's portfolio investments.See also: NAV (net asset value)

Single-family office: A private company that manages the investments and affairs of one wealthy family.
Strip sale: A sale of a slice (a pro-rata portion) of a fund's portfolio, rather than whole assets, to a secondary buyer.

Tender offer: A GP-organised process in which existing LPs are offered the chance to sell their interests to a buyer at a set price; LPs who don't tender keep their stake.
TVPI: Total value to paid-in capital: (distributions + remaining NAV) divided by paid-in capital.See also: DPI · NAV (net asset value)

Vintage year: The year a fund first calls capital or makes its first investment, used to compare funds started in the same market conditions.