Private Markets Cert key terms

Ownership stakes in companies that are not listed on a public exchange, typically bought through negotiated deals and held for several years before resale.

A transaction in which an investor acquires a controlling stake in a company, often using borrowed money and often taking the target private.

A buyout funded largely with debt secured against the target's assets and cash flows, with equity supplying only a minority of the purchase price.

Buying out public shareholders of a listed company so that its shares stop trading and the business becomes privately held.

Equity investment in young, fast-growing companies with limited operating history, usually in exchange for minority stakes and often provided in staged rounds.

Minority investment in companies that already have revenue and customers, used to fund expansion rather than to buy out existing owners.

The earliest formal financing for a startup, often raised before a product is fully built, from founders, angels, or specialist micro-funds.

An individual who invests personal money in very early-stage companies, usually in small amounts and often alongside friends or family capital.

A short document setting out the main commercial and legal terms of a proposed investment before full legal agreements are drafted.

A share class that ranks ahead of common equity for dividends and proceeds, and that typically carries special voting or conversion rights.

A contractual right for certain investors to receive a set amount of sale proceeds before other shareholders, reducing the payout left for common holders.

A protection that adjusts the conversion price of preferred shares when new stock is issued at a lower price, limiting the impact on early investors.

A financing round priced below the valuation of the previous round, which dilutes existing holders and can trigger investor protections.

The agreed worth of a company before new money is invested, used with the amount raised to calculate the post-money value and the new owners' stake.

The value of a company immediately after a financing round, equal to the pre-money valuation plus the cash raised.

The reduction in an existing shareholder's percentage ownership caused by issuing new shares or by the exercise of options and warrants.

A business in which a private markets fund has invested and which the fund's managers monitor and support during the holding period.

The length of time an investor owns an asset before selling it, which drives the timing of cash returns to fund investors.

The event through which an investor sells or otherwise realises value from an investment, such as a trade sale, listing, or secondary sale.

An exit in which a portfolio company is sold to a strategic buyer, often an established company in the same industry.

A transaction in which an existing investor sells its fund interest or its direct stake in a company to another investor rather than to the company itself.

A vehicle that buys existing investor commitments or holdings in private funds, usually at a discount to reported net asset value.

A new vehicle set up by a manager to hold assets bought from an older fund it manages, giving existing investors a choice to exit or roll over.

The firm or entity that manages a private fund, makes investment decisions, and bears unlimited liability in a traditional partnership structure.

An investor that commits capital to a private fund but takes no role in managing it, with liability limited to the amount committed.

The total amount an investor contractually agrees to provide to a fund, drawn down over time as investments are made.

A request from a fund manager to its investors to pay in part of their committed capital, usually when an investment is about to be made.

Capital that has been committed to a fund but not yet invested, available to be deployed when suitable opportunities arise.

The year in which a fund makes its first investment, used to group funds with similar market conditions for comparison purposes.

The recurring charge a fund manager deducts, usually a percentage of committed capital, to cover salaries and operating costs.

The share of investment profits paid to the fund manager, typically around twenty percent and calculated after investors recover their capital and a minimum return.

The minimum annual return a fund must deliver to its investors before the manager begins to share in profits.

The contractual order in which cash from investments is distributed among investors and the manager, covering returns of capital, preferred returns, and profit splits.

The pattern in which a private fund's returns are negative in early years because fees and losses precede gains, then rise as investments mature.

A return measure that finds the annual discount rate making the present value of all cash flows equal to zero, sensitive to their timing.

Total cash returned to investors divided by total cash invested, a simple measure that ignores how long the money was tied up.

The estimated value of a fund's holdings minus its liabilities, usually based on periodic valuations rather than traded market prices.

The documented rules and methods a manager applies to price portfolio holdings, including how often values are reviewed and who approves them.

A provision requiring a manager to return excess carried interest if, at the end of the fund's life, it has received more than its agreed profit share.