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PRIVATE EQUITY GLOSSARY OF TERMS, UNIQUE DEFINITIONS AND EXPLANATIONS

A holding in a pooled fund that pays out interest or dividends to investors, rather than re-investing them back into the fund. A speculative bond with a credit rating below investment grade. Generally, the higher the risk of default by the bond issuer, the greater the interest or coupon. A permanent organisation that is part of the wider structure of government and is responsible for oversight or administration of a specific function, such as national security or regulation of financial markets.
private equity glossary
Return on assetsThe income after taxes for the trailing 12 months divided by the average total assets, expressed as a percentage. Rentable/usable ratioA building’s total rentable area divided by its usable area. It represents the tenant’s pro-rata share of the building’s common areas and can determine the square footage upon which the tenant will pay rent. The inverse describes the proportion of space that an occupant can expect to actually use. Renewal probabilityUsed to estimate leasing-related costs and downtime, it is the average percentage of tenants in a building that are expected to renew at market rental rates upon the expiration of their leases. Open-end fundA commingled fund that does not have a finite life, continually accepts new investor capital and makes new property investments. A corporation responsible for listing securities, setting policies and supervising the stock exchange and its member activities. The NYSE, operated by a board of directors, also oversees the transfer of members’ seats on the Exchange, evaluating whether an applicant is qualified to be a specialist. Net asset value The value of an individual asset or portfolio of real estate properties net of leveraging or joint venture interests.

Terms

In the case of performance, a benchmark would be the index or indices chosen. In the case of a deal, it would be a milestone that the investors evaluate the project and determine whether more funds are warranted. The three types of investment companies are mutual funds, closed-end funds, and unit investment trusts. A fee that some funds separately impose on investors for account maintenance. For example, individuals with accounts below a specified dollar amount may have to pay an account fee. Normally put into a business with a matching loan note so the capital amount itself is protected if the equity price falls to zero. You can borrow money for normal business investments but in the context of a PE dea, the first and primary use of bank debt is to to part finance the company’s acquisition by the PE fund in the first place. We can invest in companies which own and manage a range of properties. The value of property is a matter of the valuer’s opinion and not fact. Property will not contribute to diversifying your portfolio if you already hold a substantial percentage of your investments in property.

What is a limitation of PME as a measure?

Public Market Equivalent (PME) Measures

But LN-PME results have the same limitations as the IRR: They cannot be properly averaged and generalized. 2. PME+ PME+ calculations have sought to address the calculation limitations of the LN-PME by introducing scaling factors to contributions and distributions.

A type of open-ended pooled investment vehicle, or fund, which is structured as a trust. A measure of how closely an investment portfolio follows the index against which it is benchmarked. See also predicted tracking error, realised tracking error, ex ante and ex post. The higher the ratio, the better risk-adjusted performance has been. General term for an equity or debt instrument issued by a government or company. The return generated by an investment, having been adjusted for the effects of inflation. If an investment grew in value by 5% return over one year, and the rate of inflation was 2%, the real return would be 3%.

Collective investment scheme CIS

Private placementAn offer of sale of securities to a relatively small number of investors selected by the company, generally investment banks, mutual funds, insurance companies or pension funds. Investment Trust CompanyA form of closed-ended fund traded on the public markets. The number of shares in issue is fixed and the share price fluctuates either above or below the book value of the underlying assets. The latter are fixed income securities where both the value of the loan and the interest payments are adjusted in line with inflation over the life of the security. Debt instrumentA formal contract that a government, a business or an individual can use to borrow money.
These are costs that arise when a portfolio is hedged against losses using dynamic or static hedging. For portfolios with dynamic hedging, the expenses primarily consist of purchase and redemption costs for shifting investments between the Core Portfolio and the Opportunity Portfolio. For static hedging, the costs can arise from the purchase of derivative instruments. Gilt-edged securities; the familiar name given to sterling-denominated marketable bonds issued by the British government. An obligation to make or take delivery of a specified quantity of an underlying asset at a particular time in the future and at a price agreed upon when the contract was made. Exchange-traded futures contracts have standard terms, and are subject to daily margining. A transaction in which two parties agree to the purchase and sale of a commodity or asset at some future time under such conditions as the two agree. When an investor exposes assets to the influence of uncertain variable , the assets are exposed to these factors.

This glossary explains some of the most common financial terms. Words in italics within the definitions indicate that they are explained elsewhere in the glossary. To be taken seriously as a dealmaker in today’s highly competitive market, it’s critical to be able to talk the talk. Understanding and adopting the vocabulary used across all major financial sectors can be a bit overwhelming at first, but with the help of this dealmaking glossary, you’ll be up to speed in no time. A valuation is a quantitative process used to evaluate the fair value of an asset or a company. Click the link if you’re interested in a deeper understanding of relative vs absolute valuations.
For example, good corporate governance increases the investability of companies. The interest rate that makes all present cash flows equal to zero. Simply, IRR is the return a company realizes when they invest in themselves instead of externally. The return owed to limited partners when the fund is liquidated, after all capital has been returned to LPs.

Global Private Equity Initiative GPEI

On the assumption that those with money must have some financial savvy, the U.S. Securities and Exchange Commission does not regulate funds that cater solely to the wealthy. Therefore hedge funds and private equity firms will often restrict their customer base to so-called accredited investors — those who earn at least $200,000 per year ($300,000 for a couple), or boast $1 million in net worth. The process of dividing investments among different kinds of assets, such as stocks, bonds, real estate and cash, to optimize the risk/reward tradeoff based on the investors specific situation and goals. Firms that meet the qualifications are requested to make a formal presentation to the board of trustees and senior staff members.
private equity glossary
A special purpose vehicle, or “SPV” is a legal entity that is established to facilitate an investment in an underlying company or fund. For example, a fund manager may set up an SPV to allow existing investors in its fund to invest directly into a portfolio company alongside the fund through an SPV. The legal form for SPVs is commonly a limited liability company , but sometimes they are formed as limited partnerships. A “financing round” occurs when a company raises capital in a structured manner. Read more about btc.to usd here. This typically means that the company is looking to raise a minimum amount of money at an established valuation (a financing round with a negotiated valuation is called a “priced round”). Financing rounds are typically for common stock or preferred stock, but can also be for convertible notes or SAFEs.
Independent Sponsor / Fundless Sponsor- A team of PE investment professionals who do not have a committed pool of capital (i.e. a fund). They raise capital on a deal-by-deal basis and deploy that capital immediately into each target company. Quite often, fundless sponsors have experience working at large funds and are opting to spin off on their own. Asset-backed- An investment with an asset collateralizing, or backing, the security. The asset itself provides some downside protection, and the investments are often structured to spin off recurring payments. These investments can be structured around assets like planes, ships, fleets, large equipment, machinery, wireless towers, and physical commodities. Growth – An investment funding the expansion of a business to new locations, to acquire another company, increase working capital, or invest in capital-intensive projects. Asset class- A group of investments that behave similarly in the market.

Investments

It involves everything from tracking investment exposure to managing risk. Allvue’s Portfolio Management software provides fund managers with real-time dashboards and interactive reports, so they can handle all aspects of portfolio management in one unified platform. Fund administrators are third-party service providers who handle the back- and/or middle-office needs of investment funds. Fund administrators in private capital operate in a competitive marketplace where they must try to meet the increasing needs of GPs while still building a scalable and efficient business. Allvue supports many successful fund administrators with quality Accounting, Investor Portal and CRM solutions. An additional investment in a portfolio company which has already received funding. In the case of a venture capital fund, there may be several rounds of follow-on investing. A derivative security that gives the holder the right, but not the obligation, to buy investment trust, or company shares at a pre-determined price within a set period. Warrant holders don’t have any of the rights that ordinary shareholders enjoy.

What does COB mean in business?

COB stands for “close of business.” It refers to the end of a business day and the close of the financial markets in New York City, which define U.S. business hours. It's used in business communications to set a deadline for a task to be completed by 5:00 PM Eastern Standard Time (EST).

New York’sForm Dfiling process is more onerous than other states, requiring a full submission of thePrivate Placement Memorandumand other offering documents. The anti-fraud provisions prohibit the making of a misstatement or omission of a material fact in connection with an offering ofsecurities. The company and its officers and directors can be held liable for violations. One of the key purposes of aprivate placement memorandumis to make full and adequate disclosure of the terms of a private offering to avoid violating the anti-fraud provisions, including carefully drafted risk factors. Additionally, each state has its own securities fraud provisions.

If dealing with accredited investors, the number of these is unlimited, but there is no advertising allowed. RedemptionThe right or obligation of a company to repurchase its own shares. Redemption Rights – Rights to force the company to purchase shares (a “put”) and more infrequently the company’s right to force investor to sell their shares (a “call”). A Put allows one to liquidate an investment in the event an IPO or public merger becomes unlikely. One may also negotiate a Put effective when the company defaults or fails to make payments upon a key employee’s death, etc. Private Investment In Public Equity A transaction in which accredited investors are allowed to purchase stock in a public company through an exemption allowed by provincial securities regulation.

What is capital loss ratio?

Notes: Capital loss ratio is defined as the percentage of capital in deals realized below cost, net of any recovered proceeds, over total invested capital. Impairment ratio is defined as the percentage of invested capital realized or valued at less than cost.

An offset against the management fee of certain kinds of third-party compensation received by the fund manager. Management Buy-Out is the acquisition of a company by its own company management with support from investors providing additional capital. Management Buy-In is the acquisition of a company by external company management with support from investors providing additional capital. A legally binding upper limit contained in a fund agreement beyond which no further capital commitments to the fund can be accepted from investors. Refers to the stage during which funds are raised from investors for a newly established fund. The end of the Fundraising and the last time at which new investors are accepted into closed-ended funds.

Registered RepresentativeAn individual who is licensed to sell securities on commission and works for a FINRA member firm. Real estate fundamentalsThe factors driving the value of real property (i.e., the supply, demand and pricing for land and/or developed space in a given geographic or economic region or market). ProxyA formal power of attorney document that authorizes another shareholder, a representative of the shareholder or the company’s management, to vote on behalf of the shareholder at the annual meeting. Percentage rentRent payable under a lease that is equal to a percentage of gross sales or gross revenues received by the tenant. Mechanic’s lienA claim created for the purpose of securing priority of payment of the price and value of work performed and materials furnished in constructing, repairing or improving a building or other structure. Market valueThe highest price a property would command in a competitive and open market under all conditions requisite to a fair sale. LienA claim or encumbrance against property used to secure a debt, a charge or the performance of some act. Investment committeeThe governing body overseeing corporate pension investments. Also, the subcommittee of a board of trustees charged with developing investment policy for board approval. Inflation hedgeAn investment that tends to increase in value at a rate greater than inflation and helps contribute to the preservation of the purchasing power of a portfolio.

How we invest – Investment glossary – Universities Superannuation Scheme

How we invest – Investment glossary.

Posted: Thu, 29 Jul 2021 12:28:00 GMT [source]

This agreement is concluded between the management company, the custodian bank and the investor. It is the legal basis for the management of the investment fund by the management company on the one hand and for the participation https://www.beaxy.com/exchange/btc-usd/ of the investors in the assets of the investment fund on the other. The collective investment contract is embodied by the fund regulations. Assets put up as a security that a future financial obligation will not be met.

Private equity expanding to renewable tech beyond wind, solar – S&P Global

Private equity expanding to renewable tech beyond wind, solar.

Posted: Thu, 28 Apr 2022 07:00:00 GMT [source]

The most common issuers are major companies, government bodies such as the federal government and the cantons, public institutions and international organisations such as the World Bank or the International Monetary Fund. In property investing, this describes the average time of the expiry of leases across the portfolio, weighted by rental income. The rate and extent at which the price of a portfolio, security or index, moves up and down. If the price swings up and down with large movements, it has high volatility. If the price moves more slowly and to a lesser extent, it has lower volatility.
private equity glossary
Retention rateThe percent of trailing 12-month earnings that have been ploughed back into the company. It is calculated as 100 minus the trailing 12-month payout ratio. Rental growth rateThe expected trend in market rental rates over the period of analysis, expressed as an annual percentage increase. Parking ratioDividing the total rentable square footage of a building by the building’s total number of parking spaces provides the amount of rentable square feet per each individual parking space. Non-recourse debtA loan that, in the event of a default by the borrower, limits the lender’s remedies to a foreclosure of the mortgage, realization on its assignment of leases and rents, and acquisition of the real estate.
This type of partner is a cornerstone or large institutional investor that holds shares in a company that is about to go public. A stock option provides the holder with the right—but not the obligation—to “exercise” their option to purchase a certain number of shares of company stock at an agreed-upon price after a vesting period. Dilution occurs when a company issues new shares of stock, leaving the existing stockholders with a smaller percentage ownership interest in the company. A capitalization table names the holders of a company’s equity securities and includes other related information . A portfolio company is an operating company that has received an investment from a fund. A portfolio company generally represents one of several investments for a fund .
The typical investment amount for fund management is in the range of 1-3%. Contractually determined amount paid for the AIFM’s performance of its management activity. A fund that does not invest directly in operating companies but instead into target funds. A fund-of-fund’s target funds invest into portfolio companies that are operating companies. Fundraising stage at which the first investors are accepted into a fund. Pursuant to the KAGB, a feeder fund is a fund that invests at least 85% of its assets into a master fund.
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Capital accounts are used in limited partnerships, LLCs and other flow-through, partnership based entities. YieldThis refers to either the interest received from a fixed income security or to the dividends received from a share. It is usually expressed as a percentage based on the investment’s costs, its current market value or its face value. Dividends represent a share in the profits of a company and are paid out to the company’s shareholders at set times of the year. High yield bondsLoans taken out in the form of fixed income securities issued by companies with a low credit rating from a recognised credit rating agency. They are considered to be at higher risk of default than better-quality, higher-rated fixed income securities, but they have the potential for higher rewards.

  • Fee simple interestWhen an owners owns all the rights in a real estate parcel.
  • Interest earned on a security but not yet paid to the investor.
  • The Manager then selects several Fund Managers to invest the fund’s capital, who he believes have the relevant levels of expertise to achieve the fund’s aims.

Reserve accountAn account that a borrower has to fund to protect the lender. Examples include capital expenditure accounts and deferred maintenance accounts. Rental concessionWhat landlords offer tenants to secure their tenancy. While rental abatement is one form of a concession, there are many others such as increased tenant improvement allowance, signage, below-market rental rates and moving allowances. RecourseThe right of a lender, in the event of default by the borrower, to recover against the personal assets of a party who is secondarily liable for the debt. Qualified planAny employee benefit plan that is qualified by the IRS as a tax-exempt plan. Among other requirements, the plan’s assets must be placed in trust for the sole benefit of the employees covered by the plan. Pro rataIn the case of a tenant, the proportionate share of expenses for the maintenance and operation of the property.

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