Glossary Of Investor Types

private equity glossary

A market in which prices decline sharply against a background of widespread pessimism, growing unemployment or business recession. Private equity firms typically charge substantial fees for participating in the partnership and tend to specialize in a particular type of investment. Investment characteristics of one type of private equity investment can be very, very different from another. This guide can help you understand better what’s being offered to you. The period an investor must wait before selling or trading company shares subsequent to an exit — usually in an initial public offering the lock-up period is determined by the underwriters.

private equity glossary

A bull market is a general term used to describe a market in which the investment is going up in value over a period of time. For example, US stocks have been in a “bull market” since they hit a low in 2009. Personal, non-business expenses incurred by a company on behalf of a business owner. May include owner compensation in excess of market rates, facility rental expenses in excess of market rates, personal automobiles, family vacations or other personal expenses. The value private equity glossary of a company available to equity holders after satisfying all debt obligations. Roughly calculated as the Enterprise Value less total debt plus cash. Well, now that you know the actors in this play and the processes they carry out, it is time for you to learn the documents and organization that you will need to have in order to raise investments and manage your business. In this market, limited partners sell both their existing assets and their unfunded commitment in a fund.

As a fund matures, the RVPI will increase to a peak and then decrease as the fund matures and eventually liquidates to a residual market value of zero. The amount of money that has been called by the fund from investors. The amount of money that the fund has called from investors divided by the total amount of commitments to the fund. In the case of a financial market, an index measures the change of an imaginary basket of investments representing all or a portion of that market. The period from when a fund is announced sell link to the time when the final closing occurs. During this period, the general partner will present an investor pitch (“Road Show”) as well as negotiate closing document with prospective investors. Typically, a private equity fund will operate for 10 years, with the option to extend a few more years if the need arises. This will include analysis of performance, comparison to benchmarks, meeting with fund’s management team, detailed analysis of the funds track record, reference checks, and a report based on the analysis.

Mezzanine Financing

Hockey Stick ProjectionsThe general shape and form of a chart showing revenue, customers, cash, or some other financial or operational measure that increases dramatically at some point in the future. Entrepreneurs often develop business plans with hockey stick charts to impress potential investors. General Partner ClawbackThis is a common term of the private equity agreement. Forced BuybackRedemption of convertible debt, convertible preferred stock or common stock on pre-specified terms in situations where the company’s value has not appreciated according to the agreed upon plan. Elevator PitchAn extremely concise presentation of an entrepreneur’s idea, business model, company solution, aion exchange marketing strategy, and competition delivered to potential investors. Should not last more than a few minutes, or the duration of an elevator ride. Due DiligenceA process undertaken by potential investors — individuals or institutions — to analyze and assess the desirability, value, and potential of an investment opportunity. The process of assessing the business and financial viability of a potential investment target, as well as the potential terms and conditions of an investment agreement. Corporate FundA private equity fund that is a division or subsidiary of a financial or industrial corporation. Conversion RightsRights by which preferred stock „converts” into common stock.

The fund’s NAV is calculated daily by taking the fund’s total assets, subtracting the fund’s liabilities, and dividing by the number of shares outstanding. Morningstar ratings – System for rating open- and closed-end mutual funds and annuities by Morningstar Inc. of Chicago. The system rates funds from one to five stars, using a risk-adjusted performance rating in which performance equals total return of the fund. Money market mutual fund – A short-term investment that seeks to protect principal and generate income by investing in Treasury bills, CDs with maturities less than one year and other conservative investments. Mid-cap – The market capitalization of the stocks of companies with market values between $3 to $10 billion. Median Market Cap – The midpoint of market capitalization of the stocks in a portfolio, where half the stocks have higher market capitalization and half have lower. Letter of intent – A letter of intent may also be issued by a mutual fund shareholder to indicate that he/she would like to invest certain amounts of money at certain specified times. In exchange for signing a letter of intent, the shareholder would often qualify for reduced sales charges. A letter of intent is not a contract and cannot be enforced, it is just a document stating serious intent to carry out certain business activities.

Computed as the change in income divided by the change in equity or capital invested. The investor or investors most likely to be involved in the next trade on the securities issued by a firm. Securities that share some characteristics with debt and some with equity. Cash flows raised outside the firm whether from private sources or from financial markets.

private equity glossary

FFO is equal to net income, excluding gains from debt restructuring and sales of property, plus depreciation and amortization. ERISA Legislation passed in 1974 and administered by the Department of Labor that controls the investment activities primarily of corporate and union pension plans. Equity Market CapitalizationThe market value of all outstanding common stock of a company. EquitizationThe process by which the economic benefits of ownership of a tangible asset, such as real estate, are divided amongst numerous investors and characterized in the form of publicly-traded securities. DiscretionThe level of authority granted to an adviser or manager over the investment and management of a client’s capital. A fully discretionary account typically is defined as one in which the adviser or manager has total ability to invest and manage a client’s capital without prior approval of the client.

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By investing a fixed amount, you purchase more shares when prices are low, and fewer shares when prices are high. Dividend yield – Annual percentage of return earned by a mutual fund. The yield is determined by dividing the amount of the annual dividends per share by the current net asset value or public offering price. Capitalization – The market value of a company, calculated by multiplying the number of shares outstanding by the price per share. Bear market – A bear market is a prolonged period of falling stock prices, usually marked by a decline of 20% or more.

  • Depending on the fund’s preference, the limited partners will either receive stock or cash at the time of exit.
  • At inception, institutional investors make an unfunded commitment to the limited partnership, which is then drawn over the term of the fund.
  • A sale of shares in a formerly privately-held firm on one or more public markets.
  • From the investors’ point of view, funds can be traditional or asymmetric .
  • Private equity funds are typically limited partnerships with a fixed term of 10 years .
  • A private-equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity.

This helps compensate lenders for the time, effort and possible rate changes associated with reallocating their lending dollars. In investing, Alpha is a measure of the return due to active management, rather than market exposure, or beta. This definition may be extended to private real estate transactions and management. Family OfficeAn investment firm that manages the assets and investments of high-net-worth individuals and families. Equity Crowdfunding The process of raising investment capital online from multiple investors. Angel InvestorAn investor who invests their own money into early stage companies and also provides assistance to help the company grow. The seed round is the first official round of financing for a startup.

The owner is entitled to the earnings and cash flows of the division, and the stock trades on that basis. Generally, the parent company continues to maintain full control over the division. Stock repurchase where firm specifies a price at which it will buy back shares, the number of shares it intends to repurchase, and the period of time for which private equity glossary it will keep the offer open. Bond with a coupon rate that is much lower than the market interest rate at the time of the issue. firms buy shares in securities markets at the prevailing market price, and do not have to offer the premiums required for tender offers. Measures quality of marginal investments, rather than average investments.

Investors Who Invest In Investors

The ability of the country to pay back that money becomes the main risk for investors. Almost all governments borrow money to fund their operations (e.g. borrowing money to build a bridge; it then pays the interest with tax income). The central bank in each currency area (e.g. the US, the eurozone) acts essentially as the “bank for the banks” – i.e. Essentially, because of this relationship, the central bank can set the basic “target interest rate” .

BVI has recently gained the reputation as being a cost-effective and convenient jurisdiction. BVI’s regulatory structure has sought to create a flexible jurisdiction with streamlined processes and strong legal certainty. BVI’s regulatory filing fees are considerably lower than those of the Cayman equity glossary Islands. The complexity of a securities offering requires an issuer or fund sponsor to be familiar with key securities law terminology. The glossary below contains definitions and explanations of some of the more commonly used terms used in a private securities transaction or fund formation.

private equity glossary

Capital marketsPublic and private markets where businesses or individuals can raise or borrow capital. Book valueAlso referred to as common shareholder’s equity, this is the total shareholder’s equity as of the most recent quarterly balance sheet minus preferred stock and redeemable preferred stock. Blind poolA commingled fund accepting investor capital without prior specification of property assets. Assets under managementThe current market value of real estate assets for which a manager has investment and asset management responsibilities. AppraisalAn estimate of a property’s fair market value that is typically based on replacement cost, discounted cash flow analysis and/or comparable sales price. The value of a fund’s unrealized investments divided by money paid-in to the partnership.

Successor Funds

LSVCCs operate according to some legislative specifications in most Canadian jurisdictions. The manager will, however, usually be permitted to make any investments that had already been agreed to be made prior to such date. Issue PriceThe price per share deemed to have been paid for a series of Preferred Stock. This number que es ltc is important because Cumulative Dividends, the Liquidation Preference and Conversion Ratios are all based on Issue Price. The most common example is where a company does a bridge financing and sells debt that is convertible into the next series of Preferred Stock sold by the Company at a discount to the Issue Price.

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