E

Early Stage

Type of venture fund that invests only in the early stage of a company life. There are two main categories of early stage funds: start-up and seed investments.

Early Stage: Seed

Allows a business concept to be developed, perhaps involving the production of a business plan, prototypes and additional research, prior to bringing a product to market and commencing large-scale manufacturing.

Early Stage: Start-up

Develops the company's products and funds their initial marketing. Companies may be in the process of being set up or may have been trading for a short time, but not have sold their product commercially.

Economic Infrastructure

Includes clean technology, distribution/storage facilities, environmental services, telecommunications, satellite networks; transportation - aviation/aerospace, bridges, parking lots, railways, roads, sea ports, tunnels, utilities - energy, natural resources, renewable energy, water, waste management.

Emerging Manager

An emerging manager is one with less than a two year track record.  See Preqin's Emerging Manager Download.

Emerging Markets

Funds that invest in equity or debt of emerging markets that tend to have higher inflation and volatile growth.

Endowment Plan

A fund created in support of the work of a particular non-profit institution; frequently seen for universities.

Energy

Funds that provide exposure to investment opportunities in the energy industry, including energy commodities such as oil and natural gas.

Equity Market Neutral

A hedge fund strategy that seeks to exploit differences in stock prices by being long and short in stocks within the same sector, industry, market capitalization, country, etc. This strategy creates a hedge against market factors.

Event Driven

A strategy that seeks to exploit pricing inefficiencies preceding or following a corporate event such as a bad news, distressed situation, merger, recapitalisation, or spin-off.

Expansion

(Also known as “development” or “growth capital”) Funds aiming to grow and expand an established company. For example: to finance increased production capacity, product development, marketing and to provide additional working capital.

F

Family Office

A privately owned firm that manages investments and trusts for a single wealthy family.

FCP

FCP stands for Fonds Commun de Placement. It is a contractual undertaking for collective investment based on the legal investment structures in Luxembourg.

Fee Rebates to LPs

It is common practice for the managers of private equity funds to provide corporate finance and other services to the portfolio companies that they own, and to charge for these services. These transaction fees can be very significant, often amounting to 1.0 to 1.5% of the value of companies acquired. In addition, the firms will charge monitoring fees and directors' fees to the companies in the portfolio.

Fee Reductions Post-Investment Period

As stated previously, almost all private equity funds base their management fees during the investment period on a percentage fee rate multiplied by the LP's commitments to the fund. The investment period is generally the most costly period for managing the fund, due to the workload of finding and acquiring investments, and the management fees reflect this. Fees for most funds are reduced after the investment period, and the reduction can be effected through a range of mechanisms including a step-change in the percentage rate charged, an annual reduction in the rate charged, and / or changing the asset base for fee charging from commitments to the cost basis of the unrealized portfolio.

FIL

Fondo de Inversión Libre. A Spanish investment fund

First-time Fund

A vehicle which is the first to be raised by a particular private equity firm. Usually a firm or fund management team which has not previously raised any private equity funds in the past.

Fixed Income Arbitrage

An investment strategy that consists of the discovery and exploitation of inefficiencies in the pricing of bonds, i.e. instruments from either public or private issuers yielding a contractually fixed stream of income.

Foreign Exchange

Funds that trade currencies on the foreign exchange market.

Forestry

(Also known as “Timber”) Private equity funds that invest in forestry and timber land and products.

Foundation

Non-profit organisation with some sort of philanthropic purpose in the sense that it either invests in order to accumulate capital to donate funds and support to other organisations, or provides the sole source of funding for its own charitable activities. Foundations can sometimes be confused with family offices in the sense that they may also invest with a philanthropic purpose.

Fund Formation Costs

Most partnership agreements make a provision for fund formation costs to be borne by the fund (as opposed to being an expense for the GP), up to a stated amount. As would be expected, the allowable costs generally rise with fund size, from an average of $350,000 for funds below $100 million, $1.8 million for funds of $1 billion - $4.9 billion, and $2.54 million for funds $5 billion in size and above. Placement fees are generally explicitly excluded from the costs to be borne by the fund, as these are the responsibility of the GP.

Fund of Funds

A financial instrument that invests in a number of private equity partnerships. Investing in fund of funds can help spread the risk of investing in private equity because they invest the capital in a variety of funds.  See Preqin's Fund of Fund products.

Fund of Funds Manager

Specialist fund manager, raising funds from the capital of institutional investors with which investments in private equity funds are made. They may provide exposure to private equity funds which would otherwise be inaccessible to smaller investors. Fund of funds managers minimise risk by investing in a variety of private equity fund types.

Fund Raising Outlook

Announced - fund has been announced, but has not yet entered the fund raising stage

G

General Consultant

Provides advice on the overall investment strategy of an institution.

GK

GK stands for Godo Kaisha. It is a Japanese structure and it is the same as a limited liability company.

GmbH

GmbH stands for Gesellschaft mit beschränkter Haftung, which translates to Company with Limited Liability. The structure exists in Germany, Austria and Switzerland. In Germany the company is incorporated, but not publically traded and must have at least 2 partners. In Austria there must be at least 2 founding shareholders.

Government Agency

A permanent or semi-permanent unit of a government that is responsible for the oversight and administration of specific functions. Its functions are executive in charter.

GP Carry

The GPs managing most private equity funds earn a share of the net investment gains from the fund through the carry, which can be structured in two principal ways: on a deal-by-deal basis or on a whole fund basis.  See Preqin's Fund Terms products.

GP Commitments

It is normal practice for the GP managing a private equity fund to also make a financial commitment to the fund on the same basis as the LPs in the fund, and this is seen as an important factor driving the alignment of GP and LP interests. The historic benchmark for GP commitments has been 1% of the total fund size, but this is by no means universal, and many GPs commit significantly larger amounts. Furthermore, there has been a marked trend towards GPs making larger commitments to their funds over recent years.

Greenfield Stage

Involve an asset or structure that does not currently exist and needs to be designed and constructed. Investors fund the building of the infrastructure asset as well as the maintenance after it is designed, built, and operational.

H

High Yield

A fund that invests in bonds that are rated below investment grade at the time of purchase. These bonds have a higher risk of default or other adverse credit events, but typically pay higher yields than better quality bonds in order to make them attractive to investors.

Hurdle Rates (Preferred Return)

The level of return that must be achieved by the GP before they are able to claim carry. See Preqin's Fund Terms products.

Hybrid Manager

An investment manager which offers a vast range of services often similar to the services provided by advisory firms, investment banks, private equity firms, hedge fund and asset managers. They mostly simultaneously invest in private equity and hedge funds.