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ASSET ALLOCATION

Investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets according to investor’s goals.

ALTERNATIVE INVESTMENT

An asset that is not a conventional investment type (stocks, bonds, cash).

BENCHMARK

When a fund compares its returns to the performance of similar funds.

BUYOUT/ LEVERAGED BUYOUT

An acquisition of a controlling interest in a company.

CONVERTIBLE DEBT

Debt that can be converted to equity when certain conditions are met, like a specific valuation or date.

CLOSED-ENDED-FUND

Fund created by raising money through an IPO, trades its shares on the public market like a stock.

DUE DILIGENCE

The vetting, analyzing and assessing of individuals, companies and investors before engaging in a transaction.

EARLY STAGE

The period of venture capital investment between seed and late stage deals, when companies have a proven concept and little revenue.

EBITDA

EBITDA Stands for Earnings before interest, taxes, depreciation and amortization, and refers to a company’s net profit plus interest, taxes, depreciation and amortization.

EARLY STAGE

The period of venture capital investment between seed and late stage deals, when companies have a proven concept and little revenue.

EBITDA

EBITDA Stands for Earnings before interest, taxes, depreciation and amortization, and refers to a company’s net profit plus interest, taxes, depreciation and amortization.

FAMILY OFFICE

A firm that manages assets, investments and trusts for a wealthy family.

FUND

An investment vehicle for limited partners, managed by general partners. Limited partners commit capital to funds, and general partners invest the capital into assets.

FUND-OF-FUNDS

A fund that invests in other funds. A fund-of-funds devotes all its time to evaluating fund managers, which usually leads to above-average returns. However, there are extra fees associated with investing in a fund-of-funds.

FUNDRAISING

A process through which a company raises extra cash in exchange, offering share(s) of their ownership rights.

INTERNAL RATE OF RETURN

The rate at which the net present value of all cash flows from an investment will equal zero. IRR is commonly used to gauge fund performance.

INSTITUTIONAL INVESTORS

A company or organization that invests money on behalf of other people.

LEVERAGE

The use of debt in an investment, including acquisitions and capital expenditures. With leverage, general partners can expedite improvements to portfolio companies and amplify returns.

MEZZANINE INVESTMENT

A financing round between senior and subordinated loans that typically includes equity-based options in the form of warrants.

OPEN ENDED FUND

A diversified portfolio of pooled investor money that can issue an unlimited number of shares. 

PORTFOLIO COMPANY

A company that has received an investment from a venture capital or private equity firm.

PRIVATE EQUITY

Capital that is not noted on the public stock exchange. Private equity involves investors giving private companies capital in exchange for equity.

SOVEREIGN WEALTH FUND

A state-owned investment fund designed to protect and/or grow a range of financial assets, including stocks, bonds and natural resources.

TAKEOVER

Another word for acquisition or buyout

VENTURE CAPITAL

A type of private equity investing that focuses on start-ups and early-stage companies with long-term, high-growth potential.

WARRANT

A security that gives the holder the option to purchase a company’s stock at a predetermined price for a specified period.