Glossary

The vocabulary of substantial wealth: 41 terms, each with its own page: what it means, why it matters, and where it bites.

All Banking & Insurance Family & Governance Philanthropy Private Markets Public Markets Tax Trusts & Estate

GRAT GRAT Grantor Retained Annuity Trust

An irrevocable trust in which the grantor receives fixed annuity payments for a set…

PRI PRI Program-Related Investment

A program-related investment is a foundation's concessionary loan, equity stake, or…

bp bp Basis Point

One one-hundredth of one percentage point, commonly written as "bp" or "bps," used…

CEF CEF Closed-End Fund

A closed-end fund (CEF) is a pooled investment vehicle that raises a fixed amount…

SMA SMA Separately Managed Account

A separately managed account (SMA) is a professionally managed investment portfolio…

DAF DAF Donor-Advised Fund

A charitable giving account held at a sponsoring organization that allows a donor…

Accredited Investor A legal eligibility category defined by securities regulators that determines which individuals and entities may participate in certain private… Private Markets

Capital Call A fund manager's formal request requiring investors to transfer a portion of their previously committed, but not yet paid, capital by a specified… Private Markets Carried Interest The share of a fund's investment profits paid to the general partner as performance compensation, typically calculated after investors have received… Private Markets Clawback A contractual obligation requiring the general partner to return previously paid carried interest to limited partners if, at the end of the fund's… Private Markets Co-Investment A direct stake in a single deal offered to investors alongside a private fund, often with reduced or waived management fees and carried interest. Private Markets Committed Capital The total amount an investor has contractually agreed to provide to a fund, regardless of how much has actually been transferred to date. Private Markets Continuation Fund A new fund vehicle created by a general partner to retain one or more assets beyond a fund's original term, offering existing investors the choice to… Private Markets

Distribution Cash or securities returned to investors by a fund when it sells an asset, receives income, or otherwise monetizes a holding. Private Markets Distribution Waterfall The contractual sequence that determines the order and priority in which a private fund distributes cash proceeds among the general partner and… Private Markets Distributions to Paid-In DPI A private-fund metric expressing the ratio of cumulative cash distributions returned to investors divided by the total capital they have paid in. Private Markets Drawdown Fund A private fund structure in which committed capital is called by the manager in stages as investments are made, rather than collected upfront in a… Private Markets Dry Powder Capital that has been committed to a fund but not yet deployed into actual investments, held in reserve awaiting suitable opportunities. Private Markets Due Diligence Questionnaire DDQ A standardized document that investment managers complete so allocators can systematically evaluate a firm's operations, risk controls, and… Private Markets

Evergreen Fund An open-ended private investment vehicle with no fixed termination date, allowing investors to subscribe and redeem periodically rather than… Private Markets

Fee Offset A contractual provision in private fund agreements that credits fees a fund manager earns from portfolio companies against the management fee charged… Private Markets

General Partner GP The managing entity of a private fund, typically abbreviated GP, that makes investment decisions, bears legal responsibility for the partnership, and… Private Markets GP Catch-Up A distribution tier in a private fund where the general partner receives a disproportionately large share of profits until it has caught up to its… Private Markets GP Commitment A GP commitment is the amount of their own capital that a fund's general partner invests alongside limited partners, aligning the manager's financial… Private Markets

Internal Rate of Return IRR The annualized discount rate that makes a series of cash inflows and outflows break even in present value terms, commonly used to express… Private Markets Interval Fund A registered investment fund that allows redemptions only during periodic windows, typically quarterly, rather than on demand, enabling the fund to… Private Markets

J-Curve The pattern in private fund investing where early cash outflows and fees produce negative returns before later gains push performance into positive… Private Markets

Key-Person Provision A key-person provision is a fund clause that triggers a suspension of new investments (and potentially allows limited partners to exit) if specified… Private Markets

Limited Partner LP A limited partner is an investor in a private fund who contributes capital, shares in profits and losses, and enjoys liability limited to their… Private Markets Limited Partnership Agreement LPA A Limited Partnership Agreement is the governing legal contract of a private fund that defines the rights, obligations, economics, and rules binding… Private Markets Lock-Up A defined period, stated in a fund's governing documents, during which an investor may not request any redemption of their capital. Private Markets

Management Fee An annual fee charged by a private fund manager, calculated as a percentage of committed or invested capital, covering the fund's operating costs. Private Markets Most Favored Nation Clause MFN A Most Favored Nation clause is a contractual right that entitles an investor to elect any more favorable terms granted to other investors in the… Private Markets Multiple on Invested Capital MOIC A simple ratio expressing total value returned or expected from an investment divided by the total capital invested, without regard to how long that… Private Markets

Net Asset Value NAV Net Asset Value (NAV) is the estimated total value of a fund's or portfolio's assets minus its liabilities, representing the per-share or aggregate… Private Markets

Preferred Return A minimum annual return that limited partners must receive on their capital before a fund manager begins earning carried interest, also called a… Private Markets Private Placement Memorandum PPM A Private Placement Memorandum (PPM) is the primary disclosure document for a privately offered security, describing the investment, its risks… Private Markets Public Market Equivalent PME A method of benchmarking a private fund's performance by replicating its cash flows in a public market index, enabling a like-for-like return… Private Markets

Qualified Purchaser QP A higher securities-law eligibility tier, defined by a specified level of investable assets, that opens access to certain private funds not available… Private Markets

Redemption Gate A contractual provision in a fund's governing documents that limits the total percentage of investor capital that may be withdrawn during any single… Private Markets Residual Value to Paid-In RVPI A private-fund metric expressing the ratio of the net asset value of unrealized investments still held by the fund to the total capital investors… Private Markets

Secondaries The purchase of an existing stake in a private fund or portfolio of fund stakes from another investor, rather than committing capital at the fund's… Private Markets Side Letter A side letter is a private bilateral agreement between a fund manager and a specific investor that grants that investor terms, such as fee discounts… Private Markets Side Pocket A separate accounting sleeve within a fund that isolates a specific illiquid or hard-to-value investment from the main portfolio, limiting… Private Markets Subscription Credit Line A short-term credit facility borrowed by a private fund against investors' unfunded commitments, used to deploy capital quickly before formal capital… Private Markets

Total Value to Paid-In TVPI A private-fund performance ratio calculated by dividing the sum of all distributions and remaining net asset value by the total capital investors… Private Markets

Vintage Year The calendar year in which a private fund begins making its first investments or drawing capital from investors, used as the primary basis for… Private Markets

Glossary

The Wealth Ladder

Invest

Plan

Family

Reference