PRIVATE EQUITY GLOSSARY OF TERMS, UNIQUE DEFINITIONS AND EXPLANATIONS

There could be delays involved with property due to the fact that property can take time to sell. You will have heard the term ‘hedge your bets’ used in a way of taking one action to counteract the result of another action and there is a similar process in investments. The term “hedge” in investments is an investment position intended to offset potential losses/gains that may be incurred by a companion investment. In simple language, a hedge is used to reduce any substantial losses/gains suffered by an individual or an organisation. A hedge fund is an investment vehicle that uses a number of different ‘hedging’ and ‘leveraging’ techniques to manage and grow the value of the fund. Foreign exchange hedging is the act of entering into a financial contract to protect against changes in currency exchange rates. Currency hedging is used by financial investors and businesses to reduce the possible risks around international investment. Hedging can be likened to an insurance policy that limits the impact of foreign exchange risk. Corporate bonds are issued by companies to raise money as an alternative to issuing equities.

Investment banks also manage municipalities and governments on bond issuances. Investment banks also advise companies on merger & acquisition opportunities. A “corporate carve-out” occurs when a company (often a publicly-traded company) sells a part of its business to a buyer. The carve-out can be a sale of a non-core division or subsidiary, or a sale of assets. The buyer can be another company or a financial buyer, such as a private equity fund. Beta measures a security’s sensitivity to movements by the market.

Valuation

Yield to maturity The yield to maturity of a bond is an estimate of the annualised return over the life of the bond if the bond is held until maturity and assuming that all payments are made as scheduled. It is the bond’s internal rate of return, which is the interest rate used to discount all the cashflows of the bond so that their present values sum up to the price at which the bond currently trades in the market. Share classType of fund shares held by investors in a fund (share classes differ by levels of charge and/or by other features such as hedging against currency risk). Details on charges and minimum investments can be found in the Key Investor Information Documents.

Unlike funds with swing pricing, dual priced funds have different buying and selling prices. Each day the assets of the Fund are valued on both an ‘offer’ basis and a ‘bid’ basis . Shares will ordinarily be issued at the offer price and redeemed at the bid price. The difference between the two prices is known as the “spread”. Currently only M&G Property Portfolio and M&G Feeder of Property Portfolio operate dual pricing. Bond issueA set of fixed income securities offered for sale to the public by a company or government.

Nationally Recognized Municipal Securities Information Repositories NRMSIRs

Funds of hedge funds are typically diversified across a number of different strategies and underlying managers. Refers to securities such as bonds which carry a predetermined and fixed rate of interest . The risk that a bond issuer will not be able to meet their debt payments and subsequently default on their contractual obligation to investors. The annual income from an investment, expressed as a percentage of the current price. For example, if a bond that is worth £100 gives you an annual income of £6, the current yield is 6%. Where a company exercises discipline and prudence in how much money it borrows, raises and spends, in order to deliver the best returns to its shareholders and ensure its long-term stability. Investment based on analysis of individual companies, whereby that company’s history, management, and potential are considered more important than general market or sector trends . In the context of funds, it is the price received by the investor when redeeming a share or a unit in a dual priced fund. The Exchange Act imposes ongoing reporting requirements on certain companies that have registered with the SEC under the Securities Act . Securities are financial or investment instruments that represent ownership positions in a company, a creditor relationship with the company, or some derivative of either ownership or evidenced debt.

Individual account managementAccounts established for individual plan sponsors or other investors for investment in real estate, where a firm acts as an adviser in acquiring and/or managing a direct real estate portfolio. Incentive feeApplies to fee structures where the amount of the fee that is charged is determined by the performance of the real estate assets under management. Read more about калькулятор биткоин here. Assets under managementThe current market value of real estate assets for which a manager has investment and asset management responsibilities. https://www.beaxy.com/exchange/eth-usd/Exempt Offering

Capital overhang (also known as “dry powder”) is the total amount of uncalled capital for all funds in a particular strategy or for private equity as a whole. Private equity funds usually call all or most of the uncalled capital over time, as failure to do so means that the investors may be paying management fees on money that the manager did not put to work. Lock-up PeriodThe period of time that certain stockholders have agreed to waive their right to sell their shares of a public company. Investment banks that underwrite initial public offerings generally insist upon lockups of at least 180 days from large shareholders (1% ownership or more) in order to allow an orderly market to develop in the shares.

A stockholder’s ownership interest is often reflected as either a percentage of stock or a number of shares on the company’s capitalization table. Series C often supports companies optimizing operations in preparation of a future initial public offering. Statements of shareholders’ equity show changes in the interests of a company’s shareholders over time. This differs from a company’s capitalization table, which tends to show the ownership as of a set date. Prospective investors typically evaluate an investment opportunity by conducting a due diligence review of legal and financial disclosures. Investors may solicit information using a standardized due diligence checklist, request access to relevant information, and host meetings with management to ask questions. Debt, which includes a loan, is an amount owed to an individual or entity for borrowed money to be repaid on an agreed upon maturity date, typically with interest.

Liquidity EventAn event that allows a VC to realize a gain or loss on an investment. The ending of a private equity provider’s involvement in a business venture with a view to realizing an internal return on investment. Most common exit routes include Initial Public Offerings , buy backs, trade sales and secondary buy outs. Founder VestingA term imposed on founders of seed and early stage deals in which the founder ownership is subject to a vesting schedule with nothing up front and linear vesting over, typically, four years. The first twelve months ownership is often “cliff” vested after the first year with monthly vesting thereafter. For more mature companies, vesting credit can be applied at the time of investment. The purpose of this term is to protect investors from an early, unplanned exit by the founder and to provide investors with the equity necessary to attract a new management team.

It serves a similar purpose for tax reporting as one of the various Forms 1099, which report dividend or interest from securities or income from the sale of securities. A term from baseball originally referring to the speed of the baseball as it comes off the bat, immediately after a batter makes contact. In venture it refers to the speed between investment and exit, immediately when the investment is made to the liquidity event that allows the investor to cash out. Example — capital invested for growth funds has a higher exit velocity than capital invested by accelerators in startups because the ventures are less mature and have a longer time to exit. Adjusted funds from operations is a financial measure used to estimate the value of a real estate investment trust . Private Equity as a general term refers to shares that aren’t listed on a public exchange. PE funds are institutions that specialise in making large investments in late-stage companies. A privately held company that manages and invests the wealth of ultra-high net worth families. Can be comprised of the wealth of a single family, or several families together all managed by the same Family Office.

Short positionA way for an investor to express their view that the market might fall in value. MacroeconomicRefers to the overall performance and behaviour of an economy, for example at the regional or national level. Economy-wide factors such as gross domestic output, unemployment or inflation are known as macroeconomic factors and are key indicators of economic performance. Income unitsA type of unit where distributions are paid out as cash on the payment date. Foreign exchangeThe conversion of one currency into another currency. Foreign exchange also refers to the global market where currencies are traded virtually around the clock. The term ‘foreign exchange’ is usually abbreviated as ‘forex’ and occasionally as ‘FX’.

Partner of a fund provider who sells the provider’s products to clients and redeems the products from clients. The commission charged by the distribution unit to the investor upon redemption of units. The market on which new securities are launched and enter into circulation. Risk that depends on factors which influence the whole market and which cannot be reduced or excluded by diversifying the portfolio.

• Next biggest cheques go to financial diligence providers, commercial diligence providers and so on down to the smallest players like insurance diligence.
• This different approach hugely affects risk, ambition, deal structure and outcomes for entrepreneurs.
• Net invested capital consists of contributed capital, minus capital returned from exits and any write-downs of investment value.
• Valuation metricsMeasures used for determining the current worth of an asset or company.

For private equity firms, the acquisition pipeline refers to a series of companies that they have identified as potential acquisition targets. If you work in private equity, venture capital, or investment banking then this dealmaking glossary is for you. A company’s valuation, the worth of a company determined by an analyst or as agreed upon by the company and its investors, typically establishes how much the company and its investors value the company. The valuation establishes how much equity the investor will receive in exchange for its investment. The owner of the SAFE does not have an ownership interest in the company unless the triggering event occurs and converts the instrument into equity. The seed round is typically a company’s first funding round, often raised from friends and family, angel investors, or early-stage funds in exchange for a convertible note. Capital at this stage may be used for product development and market research. Angel investors are generally high-net-worth individuals who invest their own money directly in emerging businesses, typically in early funding rounds.

The following is the glossary of terms commonly used in private equity, growth equity and venture capital. Net Operating Income Net operating income is the expected income to be collected from the operations of properties after deducting all operation-related expenses. It expresses the profitability of real estate investments that generate income. It is calculated as real estate revenue minus operating expenses. Gross An analysis at the ‘gross’ level is based on cash flows of only underlying deals without accounting for any fund net cash flows such as management fees, fund expenses amongst others. EBITDA Earnings before interest, Taxes, depreciation and amortization is an important metric to measure a company’s financial performance in terms of its operating income generation. It is calculated by first finding a company’s operating profit before subsequently removing the expenses garnered from depreciation and amortization. Drawdowns of limited partner commitments over the investment period of a fund.

Situation when a company cannot meet or has difficulty meeting its financial obligations. Investing side by side with a PE fund directly in an operating company. Legal status in which an insolvent company is declared bankrupt, typically by court order. Senior debt obligations that take precedence over the claims of other creditors in the event of insolvency .

Payments made to the seller of a business based on the future performance of the business and based on a pre-determined calculation. Hurdle rate / Preferred return- Generally, investors are given an annualized preferred rate of return before any upside is shared with the Sponsor. The long lockup of capital is, in part, why PE investments do earn such a premium. Direct investing- The purchasing of ownership in an operating company by an investor. When an investor rolls up their sleeves and opts to directly own shares in an operating company, without the fund structure in between. Often many investors work together, co-investing behind a lead investor or Sponsor who sources, structures, and becomes the primary representative of the investor group post-close. Asset allocation- The balancing of risk vs. reward in an investment portfolio by apportioning investments to different asset classes based on an investor’s risk tolerance, timing, and goals. Venture capital- Investments to help a startup scale, taking an idea from early proof to broader market adoption. This is a very capital intensive stage as most companies require large investments to start production, build brand awareness, gain new business, drive sales, accumulate inventory, or open new locations.