Glossary

Origination of loans directly to companies (typically PE-backed middle-market) without bank intermediation. The GP sources, underwrites, and holds the loan. Dominant strategy in BDCs and nontraded BDCs.

Opportunistic investments in companies under transition: restructuring, M&A, spin-offs, capital structure dislocations. Event-driven, complex structuring, active involvement.

Purchase of deeply discounted debt of companies in or near bankruptcy. Buy at discount, influence restructuring, capture recovery. Secondary market purchases, fulcrum security targeting.

Subordinated capital below senior debt, above equity. Returns from cash coupon + PIK + equity warrants/kickers. Deliberately targets junior capital structure. Benefits from falling rates.

Lending against asset pools or cash flow streams: equipment, receivables, royalties, consumer loans, aviation, IP. Collateral is the asset pool, not the enterprise. Platform-based origination.

Investment in equity (residual) tranches of CLOs. Captures leveraged spread between the CLO loan portfolio yield and its liability cost. Not direct lending — investing in a structured vehicle.

Debt to VC-backed companies, extending runway without dilution. Structured with warrants. Underwriting based on sponsor backing and runway, not cash flow coverage. Shorter duration.

Long-duration debt (10–30yr) to infrastructure assets: energy, transport, digital, utilities. Project cash flows service the debt. IG-like risk.

Lending secured by real estate: commercial mortgages, whole loans, construction, mezzanine RE loans. Underwriting on property cash flows (NOI, DSCR) and LTV.

Acquisition of mature companies using significant debt leverage. Value creation through operational improvement, multiple expansion, and deleveraging. Control stake.

Minority or majority stakes in high-growth companies with proven revenue. Less leverage than LBO. Growth acceleration, not turnaround.

Early-stage equity in startups. High risk, high potential. Portfolio approach with expected high loss rate offset by outsized winners.

Equity in distressed or underperforming companies requiring operational restructuring. Active management to restore profitability.

Stable, regulated, operational infrastructure (utilities, toll roads, airports). Yield-oriented, low risk, long hold. Contracted/regulated cash flows.

Operational assets with moderate growth potential (renewables, fiber, data centers). Slightly higher risk/return than Core.

Assets requiring significant capex, development, or repositioning. Active value creation. Medium-term hold.

Higher-risk infrastructure: greenfield, emerging markets, complex or distressed situations. Highest risk/return in infra spectrum.

Stabilized, income-producing properties in prime locations. Low leverage (<40% LTV), yield focus. Institutional quality.

Stable assets with light value-add potential (lease-up, minor repositioning). Mostly stabilized.

Properties requiring significant capex or repositioning. Active asset management. Higher leverage and return target.

Development, distressed, or complex RE situations. Highest risk/return in RE spectrum.

A direct investment alongside a private equity or credit fund into a specific deal, usually offered to LPs at reduced or no fees.

An investment made during a fund’s initial fundraising period, as opposed to secondary (purchased from an existing LP) or co-investment.

Purchase of an existing investor’s stake in a private fund, typically at a discount or premium to NAV. Provides liquidity to sellers and immediate portfolio exposure to buyers.

A single-tranche loan combining senior and subordinated debt into one facility, typically from a single lender. Common in mid-market direct lending.

Net Asset Value. Total value of a fund’s assets minus its liabilities, per share. In evergreen funds, typically calculated quarterly or monthly.

Time-Weighted Return annualized since fund launch. The longest-term performance metric, net of fees.

Internal Rate of Return. The annualized rate of return accounting for the timing and magnitude of cash flows. The standard performance metric in private markets.

Trailing twelve months distributions divided by NAV. The realized income metric — more reliable than target yield.

Target annualized total return net of fees. The GP’s stated return objective. Not guaranteed.

Current annualized distribution / NAV. The income metric advisors care most about for credit and infrastructure funds.

How often NAV is calculated and published. Daily for some interval funds. Monthly for most nontraded BDCs. Quarterly for many ELTIFs.

The year in which a fund makes its first investment or holds its final closing. Used to compare performance across funds of similar age.

Assets Under Management. Total market value of assets a fund or manager oversees. Key size indicator, updated quarterly or monthly.

Gross asset value of the fund, including the effect of leverage. Equivalent to “Total assets” in the balance sheet (GAAP / 10-K). Differs from Total NAV by the amount of fund-level debt — for a BDC with $80B gross and $46B NAV, the $34B gap is borrowing.

The fund’s own borrowing as a multiple of equity. BDCs typically 1.0–1.25x. Amplifies both gains and losses. Regulatory cap: 2.0x. Flag > 1.5x.

Sum of the 10 largest positions as % of NAV. High concentration = idiosyncratic exposure. Flag > 25%.

Percentage of portfolio in first lien senior secured loans. Measures seniority quality — first in line for recovery in case of default.

Position in the capital structure: First Lien (senior secured), Second Lien, Senior Unsecured, Subordinated, Preferred, or Equity. Determines recovery priority in default.

Percentage of loans no longer earning interest. First sign of portfolio stress — precedes actual losses by 6–12 months. Flag > 2.0%.

Payment-In-Kind. Interest capitalized rather than paid in cash. The borrower can’t afford cash interest — inflates reported income and defers risk. Flag > 10%.

Net realized losses as % of average portfolio. A lagging but ultimate indicator of credit quality. Flag > 1.0%.

Weighted average portfolio leverage. 5x adjusted can be 8–10x real. The gap between adjusted and cash EBITDA is where risk hides. Flag > 6.0x.

EBITDA / interest expense. Below 1.0x means the borrower cannot cover interest payments. Flag < 1.5x.

Loan amount relative to asset value. 50% = solid cushion. 80% = thin margin. Critical for real estate debt and asset-based finance. Flag > 65%.

Average spread over SOFR or EURIBOR. Higher spread = riskier borrowers. 650bps signals more risk than 450bps. Context-dependent by strategy.

Remaining average contract or loan life. Longer = revenue visibility. Short = re-contracting risk. Flag < 5yr for infrastructure.

Proportion of loans with variable interest rates. In a rate-cutting cycle, floating income drops. 98% floating loses more per cut than 60%.

Percentage of portfolio in non-base currencies without hedging. Adds uncorrelated volatility. Flag > 20%.

Proportion of NAV actively invested vs held in cash or public market equivalents. Measures effective deployment rate.

Capital committed to underlying funds but not yet called, as % of NAV. Creates future liquidity pressure — risk is highest when capital calls coincide with redemption requests.

Unrealized gains / (unrealized + realized gains). Measures NAV fragility: paper performance vs actual cash returned.

Number of portfolio companies on a look-through basis across all underlying funds. Key diversification measure for fund-of-funds vehicles.

Share of portfolio revenues under long-term contracts (PPAs, concessions) or regulated tariffs. Core measure of cashflow visibility for infrastructure funds.

Share of portfolio revenues contractually tied to inflation indices (CPI, RPI). Key infrastructure differentiator. Protects real returns in inflationary environments.

Weighted average remaining contract life across the portfolio. Longer = revenue visibility. Short = re-contracting risk. Key infrastructure metric. Flag < 5yr.

Type of interest payment: fixed rate, floating (SOFR + spread), or PIK (payment-in-kind, where interest is capitalized rather than paid in cash).

Maximum percentage of NAV redeemable per period. When requests exceed the gate, redemptions are pro-rated or queued. The single most important liquidity metric for evergreen funds.

How often investors can request to redeem. Most BDCs/interval funds: quarterly. Some ELTIFs: none until maturity. Gate determines real exit capacity.

Days before the redemption window that a written request must be submitted. Missed deadline = wait for next window. Typically 30–90 days.

Minimum holding period before first redemption is allowed. Nontraded BDCs: 0–12 months. ELTIFs 2.0: often 3–5 years.

Redemption penalty within a specified period. Nontraded BDCs: often 2% within 12 months, 0% after. A soft lock-up disguised as a fee.

Liquid assets divided by maximum quarterly redemptions (gate). Measures the fund’s ability to honor redemptions without selling illiquid assets at a discount. Flag < 1.5x.

For tender offer funds: actual buyback track record. Offering 5% but filling only 60% = functionally gated at 3%. Fill rate is the real liquidity metric.

How often new investors can enter. Listed BDCs: daily. Nontraded BDCs: monthly or quarterly. Some ELTIFs: quarterly or annual.

How often distributions are paid to investors. Monthly is standard for most BDCs. Quarterly or semi-annual for ELTIFs and FCPRs.

Annual fee on net assets (or gross for some BDCs). Typically 1.00–1.75% for direct lending. May differ from the maximum stated in the prospectus.

Fee charged on returns above the hurdle rate. Also called carried interest or incentive fee.

Performance fee on income or gains above the hurdle. Typical BDC structure: 20% above 7% hurdle + 20% of realized gains.

Minimum return a fund must achieve before the GP can earn performance fees (carried interest). Typically 6–8% annually.

Prevents the GP from earning performance fees until prior losses are fully recovered. Protects LPs from paying fees on the same gains twice.

Mechanism allowing the GP to catch up to full incentive allocation after the hurdle rate has been met. Standard in most PE and credit fund waterfalls.

The order in which a fund distributes profits: return of capital → preferred return (hurdle) → GP catch-up → carried interest split.

All-in annual cost: management fee + admin + custody + legal + interest on borrowings. The true cost. Can be much higher than management fee alone for levered BDCs.

Upfront subscription fee charged when investing. Typically 0–5% depending on share class and distribution channel.

Fee charged on redemption. Typically 0–5%, sometimes with a declining schedule during the soft lock-up period.

An open-ended private market fund with no fixed maturity. Investors can subscribe and redeem periodically (typically quarterly), subject to gates and notice periods. Also called semi-liquid or perpetual.

European Long-Term Investment Fund. A regulated EU fund structure designed to channel capital into long-term, illiquid investments. ELTIF 2.0 (2024) broadened retail access significantly.

Business Development Company. A US-listed vehicle that provides debt and equity financing to small and mid-sized private companies. BDCs offer daily or periodic liquidity through stock exchange listings.

A US SEC-registered fund that periodically offers to repurchase shares at NAV, typically quarterly. Can invest heavily in illiquid assets.

A US fund where the board periodically offers to repurchase shares at NAV. Unlike interval funds, tender offers are discretionary.

Fonds Commun de Placement à Risques. A French PE fund vehicle investing at least 50% in unlisted securities. Common in France for retail and institutional PE allocation.

Minimum investor qualification. US BDCs: often Accredited or Qualified Purchaser. ELTIFs 2.0: open to retail with suitability test. Determines addressable market.