Essentials
They participate as passive investors, with individual liability limited to the capital committed to the fund
Limited Partner
The earliest round of investment in venture capital funding
Seed Round
Assessment of the viability of a target's business model
Due Diligence
Tate's Baking
RMCF
These investments differ from conventional PE funds as their mandate adds a social return component to their financial return target
Impact Investing (or ESG)
PE funds structured as limited partnerships are typically raised for this duration of time, commonly referred to as the “blank” model.
10+2 model
Portfolio companies controlled by another buyout fund as the target of acquisition
Secondary Buyout
Provides investors with an overview of the fund’s strategy, its target return, and the risks involved
Pitch Book
Energy Exemplar
RAF
A PE firm approaches one or more investors with an opportunity to invest side by side with the main fund in a single target company
Co-investment
This visual tool represents an LP's cumulative net cash flow position in a single fund over time
J-curve
Growth equity investments are usually made in exchange for a "blank" equity stake
Minority
A PE fund’s GP secures capital commitments from investors through a series of "blank" held over a period of 6 to 18 months
closings
A situation where one or two crucial partners leave a fund manager in the middle of a fund’s term
Key-person Risk
Unlike more traditional closed funds, these funds provide a permanent source of capital for a PE firm to conduct its investment activity
Evergreen Funds or Listed Funds
A fund’s un-invested committed capital is referred to as its
Dry Powder
The acquisition of a corporate division, business unit, or subsidiary with the intention of setting it up as a stand-alone company
carve-out
Typically organized by an investment bank, multiple parties compete for the right to acquire a target company
Auction
Allocating too small a number of funds; Also from exceptional performance of, or early distributions from, funds with shared characteristics
Concentration Risk
The strategy of acquiring stakes in the debt obligations of companies in financial trouble
In a typical distribution waterfall, PE funds will return all invested capital and provide a minimum return to investors – a fund’s "blank" – before any carried interest is paid out to the GP.
hurdle rate or preferred return
Typically issued by one or more banks, this represents the largest portion of debt raised for a Leveraged Buyout
Senior Debt
Debt and equity capital provided to fund a LBO typically flows through a series of "blank" that reinforce the seniority of the capital providers’ economic claims
Specialty Purpose Vehicles (SPVs)
Capital distributed from exits must be reinvested, yet new commitments can only be made to PE funds in fundraising. A slowly but surely expanding number of PE funds in the portfolio
Ballooning Portfolio Risk
Shifting exposure to a PE fund from one party to another in exchange for a regular cash payment. The seller meets all capital calls and receives all distributions, which are transferred to the buyer. In return the buyer pays the seller a regular, fixed payment
Total Return Swaps