A

130/30 Strategy

A strategy that uses financial leverage by shorting poor performing stocks and purchasing shares that are expected to have high returns. A 130-30 ratio implies shorting stocks up to 30% of the portfolio value and then using the funds to take a long position in the stocks the investor feels will outperform the market.

AB

Aktiebolag. A Swedish stock company. Privately-held ABs must have capital of at least SEK 100,000 upon incorporation.

Absolute Return

Funds that are able to generate a return regardless of market conditions.

Accounts Receivables

A type of asset-financing arrangement in which a company uses its receivables as collateral in a financing agreement.

Activists

Funds that generally buy a large enough part of the company to be able to participate in the management and decision making.

Advisor

An institution/firm that provides advisory services for a fee. Investors can use advisory services to different extents. Institutions can also have different advisors for different parts of its investment portfolio and/or strategies.  See Preqin's Alternative Investment Advisor Review.

Aggressive Growth

Funds that invest in equities expected to experience acceleration in growth of earnings per share.

ASA

An ASA is a Norwegian structure. It is a stock company. Since 1996 all Norwegian companies have been incorporated into this structure.

Asset Based Lending Strategies

A type of financing in which the asset being bought is used as collateral. In asset based lending, the quality of the collateral and not the financial strength of the borrower is of prime importance.

Asset Manager

Provides investment management and consultancy to a range of investors. The asset manager will invest the pooled funds of its clients in a diverse range of asset classes, minimising risk while maximising return.

Average IRR

Average IRR is simply the mathematical mean. Average IRRs must be analysed with care because the mean value may be strongly affected by outlier IRR values.

B

Balanced

Private equity funds that invest in companies at all stages of development from early stage to buy-out.

Bank

A financial institution in which money is kept for commercial or savings purposes or is invested, used for loans, or exchanged. It mainly acts as a payment agent for its customers to lend and borrow money, as well as provide a variety of financial services.

Bite-Size

A range of money which an investor looks to commit to each vehicle it invests in. In some cases it is taken as an investor's average commitment to funds it has committed to in the past and can vary with different fund types.

Bridge Loan

Interim financing for an individual or business until permanent or the next stage of financing can be obtained. Bridge loans are often used for commercial real estate purchases to quickly close on a property, retrieve real estate from foreclosure, or take advantage of a short-term opportunity in order to secure long term financing.

Brownfield Stage

Involve an existing asset or structure that requires improvements, repairs, or expansion. The infrastructure asset or structure is usually partially operational and may already be generating income.

Buyout

(Also known as MBO-LBO-MBI–BIMBO) Buyout funds enable the current operating management and investors to acquire or to purchase a significant shareholding in the product line or business they manage. The financial sponsor usually gains control of a majority of a target company's equity through the use of borrowed money or debt.

BV

BV stands for Besloten Vennootschap. It is a limited liability company located in Belgium, the Netherlands or the Netherlands Antilles.

C

Called up %

The proportion of the LPs' aggregate commitments to the partnership that have been contributed to the partnership. These figures are as reported by the LP, so that in cases where the GP and LP have treated part of a distribution as a refund of contributions (and potentially liable to being recalled at a later date) the called up % will be amended accordingly.

Capital Structure Arbitrage

Funds that aim to exploit the pricing inefficiency that exists in the capital structure of the same firm.

Charging Interval

Whether management fees are levied monthly, quarterly, or six-monthly.

CMBS

Commercial Mortgage-Backed Security. A security backed by mortgages on commercial real estate.

Co-Investment

Co-Investments are minority investments made alongside a private equity investor in an LBO, a recapitalization or an expansion capital transaction. It is a passive, non-controlling investment, as the private equity firm involved will typically exercise control and perform monitoring functions.

Co-investment

Direct investment made by a limited partner in a company also backed by the private equity fund. The limited partner therefore acquires two separate stakes in the company - one indirectly through the fund and one directly in the company.

Co-Investments

Many buyout and other GPs will occasionally offer co-investment opportunities to their LPs. The partnership agreement may sometimes specify that the LPs may be offered co-investment opportunities, but usually this will specify that this offer is at the discretion of the GP, rather than a matter of entitlement for the LP. In practice many GPs will offer co-investment opportunities in several of their portfolio investments, perhaps of the nature of 10 - 20% of them, i.e. perhaps two or three deals per fund on average. Generally speaking, co-investments are offered primarily to the larger LPs in the fund, and / or to those who were cornerstone investors in the first close.

Commitment

The specified sum of capital an LP has agreed to contribute to a private equity fund. The sum of commitments to a private equity fund equals the total size of the fund.

Convertible Arbitrage

Funds that attempt to exploit profits when there is a pricing error made in the conversion factor of the convertible security.

Core

Investment in low risk real estate that provides relatively low returns. Investments are typically located in primary markets and in the main property types (offices, retail, industrial and residential). Properties are stable, well-maintained, well-leased and often of the class A variety. Investments require little or no leverage (0 to 30%) or additional capital investment.

Core-plus

Investment in moderate risk real estate that provides moderate returns. Investments are predominantly core but with an emphasis on a modest value add approach. Focus is on the main property types, in both primary and secondary markets, in class A or lower quality buildings that require some form of enhancement (i.e. repositioning and/or releasing). Investments require between 30 to 55% leverage and some additional capital investment.

CPI

Consumer Price Index. A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care.

CRE CDO

A CDO backed primarily by commercial real estate assets. CDO is a type of asset-backed security and structured credit product.

Credit

A fund that looks to generate risk adjusted returns using various credit instruments such as credit securities, collaterised loan obligations and collaterised debt obligations.

CTA

Commodity trading advisors look after managed futures accounts, deciding on their positions based on expected profit potential. This will incorporate buying and selling commodity futures or futures options. Managed futures offer the potential for reduced portfolio volatility and the ability to earn profit in any economic environment.

Currency

Hedge funds that invest in currencies can implement a number of different strategies such as currency trading, currency options and derivatives.

Current Allocation to PE

The total amount committed to private equity funds as a percentage of total assets.

CV

CV stands for Commanditaire Vennootschap. It is a Dutch structure and it is the same as a Limited Partnership.

D

Dedicated Short Bias

A strategy in which the fund manager takes more short positions than long positions.

Directional

A fund strategy used by investors that open positions, either long or short, on the belief that they are able to correctly predict the movement of price in a security.

Discretionary Advisor

Makes all investment decisions on behalf of an institution but within the institution's specific guidelines. See Preqin's Alternative Investment Advisor Review.

Distressed

Investments in distressed assets. Investments can be of a variety of means. Funds may provide debt or equity to owners with liquidity problems, or that are seeking to recapitalize properties. The property itself maybe in a state of disrepair or underperforming.

Distressed Debt

Funds that buy corporate bonds of companies that have either filed for bankruptcy or appear likely to do so in the near future. As part of the company reorganizations, distressed debt firms often forgive the debt obligations of the company, in return for enough equity in the company to compensate.  See Preqin's Distressed Private Equity Review.

Distressed Securities

A strategy that buys equity, debt or trade claims at deep discounts of companies in or facing bankruptcy or reorganisation.

Distributed (DPI – Distribution to paid in) %

The proportion of the called up capital that has been distributed or returned back to LPs. This will include cash and stock distributions, with the latter being valued as at the date of distribution and treated in the same way as a cash distribution. Distributed % is one measure of the cash performance of the partnership that is not subject to judgemental factors (as for value and IRR).

Drawdown

The actual act of transferring capital into the fund's portfolio companies; when a fund manager/general partner has decided where it would like to invest the private equity fund capital, it will approach its limited partners in order to draw down some of the capital which is already committed to the fund.