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Glossary

Terms are grouped by section of a fund profile.

 

Fund Basic Info

DFIs: Development Finance Institution - A governmental or inter-governmental body that provides development finance.

HNWIs: High Net Worth Investors - A classification used by the financial services industry to denote an individual or a family with high net worth. High net worth is generally quoted in terms of liquid assets over a certain figure, but the exact amount differs by financial institution and region.

Inception Year:Year the fund/product was first offered to investors

Track Record: History of fund returns.

Vintage Year: The year in which the venture firm began making investments.

 

Financial (Asset-class)

Fixed Income:  An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. Unlike a variable-income security, where payments change based on some underlying measure such as short-term interest rates, the payments of a fixed-income security are known in advance.

Fund of Funds: A fund that invests in other funds. This method is sometimes known as "multi-management”.

Hedge Fund: An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark).

Private Equity/Venture Capital: Private Equity/Venture Capital consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.

Real Asset: Fund that invests in physical or identifiable assets such as metals, land, equipment, patents, etc.

 

Financial (Sub-asset Class)

ABS: Asset-backed security – A financial security backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities.

Sub-asset class for Fixed-Income

Convertible Arbitrage: A hedge fund investment strategy that involves the long position on a convertible security and a short position in its converting common stock.

Sub-asset class for Hedge Fund

Dedicated Short Bias: A hedge fund investment strategy with which the fund manager takes more short positions than long positions.

Sub-asset class for Hedge Fund

Event driven: A hedge fund strategy in which the manager takes significant positions in a certain number of companies with "special situations” including distressed stocks, mergers, recapitalisation, spin-off, etc.

Sub-asset class for Hedge Fund

Fixed Income Arbitrage: A hedge fund investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income arbitrage strategy, the investor assumes opposing positions in the market to take advantage of small price discrepancies while limiting interest rate risk.

Sub-asset class for Hedge Fund

Global Macro: A hedge fund strategy that bases its holdings – such as long and short positions in various equity, fixed income, currency, and futures markets  –  primarily on overall economic and political views of various countries (macroeconomic principles)  

Sub-asset class for Hedge Fund

IPS: Inflation Protected Security -A type of fixed-income investment that guarantees a real rate of return. The real rate of return is the nominal return, less the inflation rate, thus protecting investors from inflation.  

Sub-asset class for Hedge Fund

Long-Short Equity: A hedge fund strategy that involves buying certain stocks long and selling others short

Sub-asset class for Hedge Fund

Managed Futures: Futures positions entered into by professional money managers, known as commodity trading advisors, on behalf of investors. Managers invest in energy, agriculture and currency markets (among others) using futures contracts and determine their positions based on expected profit potential.  

Sub-asset class for Hedge Fund

MBS: Mortgage-backed security – A type of asset-backed security that is secured by a mortgage or collection of mortgages.  

Sub-asset class for Hedge Fund

Mezzanine Financing:  Mezzanine debts are debts that incorporate equity-based options, such as warrants, with a lower-priority debt.   

Sub-asset class for Private Equity/Venture Capital

Multi-Strategy: A hedge fund investment approach that is diversified by employing various strategies simultaneously to realize short- and long-term gains.

Sub-asset class for Hedge Fund

Neutral:A hedge fund strategy that seeks to exploit differences in stock prices by being long and short in stocks within the same sector, industry, market capitalization, country, etc.  

Sub-asset class for Hedge Fund

 

Financial (Style/Stage)

Buyout: A later stage of financing that enables the current operating management and investors of a company to acquire or to purchase a significant shareholding in the product line or business they manage. The financial sponsor usually gains control of a majority of a target company's equity through the use of borrowed money or debt.

Style/Stage for Private Equity/Venture Capital

Distressed: A style of investingin distressed assets. Funds may provide debt or equity to owners with liquidity problems, or that are seeking to recapitalize properties.

Style/Stage for Private Equity/Venture Capital

Early Stage:  Stage of financing in companies that typically have completed their seed stage and have a founding or core senior management team, have proven its concept or completed its beta test, have minimal revenues, and no positive earnings or cash flows.

Style/Stage for Private Equity/Venture Capital

Late stage: Stage of financing in more mature companies.

Style/Stage for Private Equity/Venture Capital

Mezzanine Financing:  Stage of financing for a company immediately prior to its IPO. Mezzanine level financing can take the structure of preferred stock, convertible bonds or subordinated debt.

Style/Stage for Private Equity/Venture Capital

PIPE: Private Investment in Public Equity – A private investment firm's, mutual fund's, or other qualified investors' purchase of stock in a company at a discount to the current market value per share for the purpose of raising capital.

Style/Stage for Private Equity/Venture Capital

Secondary: The market for the sale of partnership interests in private equity funds.

Style/Stage for Private Equity/Venture Capital

Seed Stage: Stage of financing that enables a business concept to be developed, perhaps involving the production of a business plan, prototypes and additional research, prior to bringing a product to market and commencing large-scale manufacturing.  

Style/Stage for Private Equity/Venture Capital

Start-up:  Stage of financing that helps develop a company's products and funds their initial marketing. Companies may be in the process of being set up or may have been trading for a short time, but not have sold their product commercially.  

Style/Stage for Private Equity/Venture Capital

 

Financial (Other)

Accredited Investor:The federal securities laws define the term accredited investor in Rule 501 of Regulation D. See SEC site for more information (http://www.sec.gov/answers/accred.htm)

Carried Interest: A share of any profits that the general partners of a fund receive as compensation.

Committed Capital: The total dollar amount of capital pledged to a fund.

Financial Benchmark: A standard against which the performance of an individual security or group of securities is measured.

Hurdle Rate: The level of return that must be achieved by the GP before they are able to claim carry.

Management Fee: A charge levied by an investment manager for managing an investment fund.

Target IRR: Target Internal Rate of Return – Earned by an LP after fees, carry, and conversion to USD. For active funds, internal rate of return is based upon the realized cash flows and the valuation of the remaining interest in the partnership.

 

Impact

GIIRS: Global Impact Investing Ratings System –  A project of the independent non-profit B Lab, will assess the social and environmental impact (but not the financial performance) of companies and funds using a ratings approach analogous to Morningstar investment rankings or S&P credit risk ratings. Read more

IRIS: The Impact Reporting and Investment Standards (IRIS) – A common framework for defining, tracking, and reporting the social and environmental performance of impact investments. IRIS is a project within the Global Impact Investing Network (GIIN), an organization dedicated to increasing the effectiveness of impact investing. Read more