Gips Glossary

Front 1

ACCRUAL
ACCOUNTING

Back 1

The system of recording financial transactions as they come into existence
as a legally enforceable claim, rather than when they settle.

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ADDITIONAL
INFORMATION

Back 2

Information that is REQUIRED or RECOMMENDED under the GIPS standards
and is not considered as "SUPPLEMENTAL INFORMATION" for the
purposes of compliance.

Front 3

ADMINISTRATIVE
FEES

Back 3

All fees other than the TRADING EXPENSES and the INVESTMENT MANAGEMENT
FEE. ADMINISTRATIVE FEES include CUSTODY FEES, accounting fees,
consulting fees, legal fees, performance measurement fees, or other
related fees. These ADMINISTRATIVE FEES are typically outside the control
of the investment management FIRM and are not included in either
the GROSS-OF-FEES RETURN or the NET-OF-FEES RETURN. However, there
are some markets and investment vehicles where ADMINISTRATIVE FEES
are controlled by the FIRM. (See the term "BUNDLED FEE.")

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BUNDLED FEE

Back 4

A fee that combines multiple fees into one "bundled" fee. BUNDLED
FEES can include any combination of management, transaction, custody,
and other ADMINISTRATIVE FEES. Two specific examples of BUNDLED
FEES are the wrap fee and the all-in fee.

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All-In BUNDLED Fee

Back 5

Due to the universal banking system in some countries,
asset management, brokerage, and custody are often part of
the same company. This allows banks to offer a variety of
choices to customers regarding how the fee will be charged.
Customers are offered numerous fee models in which fees
may be bundled together or charged separately. All-in fees
can include any combination of INVESTMENT MANAGEMENT,
TRADING EXPENSES, CUSTODY, and other ADMINISTRATIVE
FEES.

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Wrap BUNDLED Fee

Back 6

Wrap fees are specific to a particular investment product.
The U.S. Securities and Exchange Commission (SEC)
defines a wrap fee account (now more commonly known
as a separately managed account or SMA) as "any advisory
program under which a specified fee or fees not based
upon transactions in a client's account is charged for
INVESTMENT ADVISORY services (which may include PORTFOLIO
management or advice concerning the selection of
other investment advisers) and execution of client transactions."
A typical separately managed account has a contract
or contracts (and fee) involving a sponsor (usually a
broker or independent provider) acting as the INVESTMENT
ADVISOR, an investment management firm typically
as the subadvisor, other services (custody, consulting,
reporting, performance, manager selection, monitoring,
and execution of trades), distributor, and the client (brokerage
customer). Wrap fees can be all-inclusive, assetbased
fees (which may include any combination of management,
transaction, custody, and

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CAPITAL
EMPLOYED
(REAL ESTATE)

Back 7

The denominator of the return expressions, defined as the
"weighted-average equity" (weighted-average capital) during the
measurement period. CAPITAL EMPLOYED SHOULD not include any
income or CAPITAL RETURN accrued during the measurement period.
Beginning capital is adjusted by weighting the cash flows (contributions
and distributions) that occurred during the period.
Cash flows are typically weighted based on the actual days the
flows are in or out of the PORTFOLIO. Other weighting methods
are acceptable; however, once a methodology is chosen, it SHOULD
be consistently applied.

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CAPITAL RETURN
(REAL ESTATE)

Back 8

The change in the MARKET VALUE of the REAL ESTATE investments
and cash/cash equivalent assets held throughout the measurement
period (ENDING MARKET VALUE less beginning MARKET
VALUE) adjusted for all capital expenditures (subtracted) and the
net proceeds from sales (added). The return is computed as a
percentage of the CAPITAL EMPLOYED through the measurement
period. Synonyms: capital appreciation return, appreciation
return.

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CARRIED
INTEREST
(PRIVATE EQUITY)

Back 9

The profits that GENERAL PARTNERS earn from the profits of the
investments made by the fund (generally 20–25%). Also known as "carry."

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CLOSED-END
FUND
(PRIVATE EQUITY)

Back 10

A type of investment fund where the number of investors and the
total COMMITTED CAPITAL is fixed and not open for subscriptions
and/or redemptions.

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COMMITTED
CAPITAL
(PRIVATE EQUITY)

Back 11

Pledges of capital to a VENTURE CAPITAL fund. This money is typically
not received at once but drawn down over three to five years,
starting in the year the fund is formed. Also known as "commitments."

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COMPOSITE

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Aggregation of individual PORTFOLIOS representing a similar investment mandate, objective, or strategy.

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COMPOSITE
CREATION DATE

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The date when the FIRM first groups the PORTFOLIOS to create a
COMPOSITE. The COMPOSITE CREATION DATE is not necessarily the
earliest date for which performance is reported for the
COMPOSITE. (See COMPOSITE INCEPTION DATE.)

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COMPOSITE
DEFINITION

Back 14

Detailed criteria that determine the allocation of portfolios to
COMPOSITES. COMPOSITE DEFINITIONS MUST be documented in the
FIRM'S policies and procedures.

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COMPOSITE
DESCRIPTION

Back 15

General information regarding the strategy of the COMPOSITE. A
description may be more abbreviated than the COMPOSITE DEFINITION
but includes all salient features of the COMPOSITE.

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COMPOSITE
INCEPTION DATE

Back 16

The earliest date for which performance is reported for the COMPOSITE.
The COMPOSITE INCEPTION DATE is not necessarily the date
the PORTFOLIOS are grouped together to create a COMPOSITE.
Instead, it is the initial date of the performance record. (See COMPOSITE
CREATION DATE.)

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CUSTODY FEES

Back 17

The fees payable to the custodian for the safekeeping of the PORTFOLIO'S
assets. CUSTODY FEES typically contain an asset-based portion
and a transaction-based portion of the fee. The total CUSTODY
FEE may also include charges for additional services, including
accounting, securities lending, or performance measurement.
CUSTODY FEES that are charged per transaction SHOULD be included
in the CUSTODY FEE and not included as part of the TRADING
EXPENSES.

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DIRECT
INVESTMENTS
(PRIVATE EQUITY)

Back 18

An investment made directly in VENTURE CAPITAL or PRIVATE EQUITY assets (i.e., not via a partnership or fund).

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DISPERSION

Back 19

A measure of the spread of the annual returns of individual PORTFOLIOS
within a COMPOSITE. Measures may include, but are not
limited to, high/low, inter-quartile range, and standard deviation (asset weighted or equal weighted).

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DISTINCT
BUSINESS ENTITY

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A unit, division, department, or office that is organizationally and
functionally segregated from other units, divisions, departments,
or offices and retains discretion over the assets it manages and
autonomy over the investment decision-making process. Possible
criteria that can be used to determine this include:
• being a legal entity
• having a distinct market or client type (e.g., institutional,
retail, private client, etc.)
• using a separate and distinct investment process

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DISTRIBUTION
(PRIVATE EQUITY)

Back 21

Cash or the value of stock disbursed to the LIMITED PARTNERS of a venture fund.

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DRAWDOWN
(PRIVATE EQUITY)

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After the total COMMITTED CAPITAL has been agreed upon between
the GENERAL PARTNER and the LIMITED PARTNERS, the actual transfer
of funds from the LIMITED PARTNERS' to the GENERAL PARTNERS'
control in as many stages as deemed necessary by the GENERAL PARTNER is referred to as the drawdown.

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ENDING MARKET
VALUE
(PRIVATE EQUITY)

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The remaining equity that a LIMITED PARTNER has in a fund. Also referred to as net asset value or RESIDUAL VALUE.

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EVERGREEN FUND
(PRIVATE EQUITY)

Back 24

An OPEN-END FUND that allows for on-going investment and/or
redemption by investors. Some EVERGREEN FUNDS reinvest profits in
order to ensure the availability of capital for future investments.

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EX-ANTE

Back 25

Before the fact.

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EX-POST

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After the fact

Front 27

EXTERNAL
VALUATION
(REAL ESTATE)

Back 27

An EXTERNAL VALUATION is an assessment of MARKET VALUE performed
by a third party who is a qualified, PROFESSIONALLY DESIGNATED,
CERTIFIED, OR LICENSED COMMERCIAL PROPERTY VALUER/APPRAISER.
EXTERNAL VALUATIONS MUST be completed following the valuation
standards of the local governing appraisal body.

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FAIR VALUE

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The amount at which an asset could be acquired or sold in a
current transaction between willing parties in which the parties
each acted knowledgeably, prudently, and without compulsion.

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FEE SCHEDULE

Back 29

The FIRM'S current INVESTMENT MANAGEMENT FEES or BUNDLED
FEES for a particular presentation. This schedule is typically listed
by asset level ranges and should be appropriate to the particular prospective client.

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FINAL REALIZATION
DATE
(PRIVATE EQUITY)

Back 30

The date when a COMPOSITE is fully distributed.

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FIRM

Back 31

For purposes of the GIPS standards, the term "FIRM" refers to
the entity defined for compliance with the GIPS standards. See
the term "DISTINCT BUSINESS ENTITY."

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GENERAL PARTNER
(PRIVATE EQUITY)

Back 32

(GP) a class of partner in a partnership. The GP retains liability
for the actions of the partnership. In the PRIVATE EQUITY world,
the GP is the fund manager and the LIMITED PARTNERS (LPs)
are the institutional and high-net-worth investors in the partnership.
The GP earns a management fee and a percentage of
profits. (See the term "CARRIED INTEREST.")

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GROSS-OF-FEES
RETURN

Back 33

The return on assets reduced by any TRADING EXPENSES
incurred during the period.

Front 34

GROSS-OF-FEES
RETURN
(PRIVATE EQUITY)

Back 34

The return on assets reduced by any TRANSACTION EXPENSES
incurred during the period.

Front 35

INCOME RETURN
(REAL ESTATE)

Back 35

The investment income accrued on all assets (including cash
and cash equivalents) during the measurement period net of all
nonrecoverable expenditures, interest expense on debt, and
property taxes. The return is computed as a percentage of the CAPITAL EMPLOYED through the measurement period.

Front 36

INTERNAL
VALUATION
(REAL ESTATE)

Back 36

An INTERNAL VALUATION is an advisor's or underlying third-party
manager's best estimate of MARKET VALUE based on the most
current and accurate information available under the circumstances.
An INTERNAL VALUATION could include industry practice
techniques, such as discounted cash flow, sales comparison,
replacement cost, or a review of all significant events (both general
market and asset specific) that could have a material
impact on the investment. Prudent assumptions and estimates
MUST be used, and the process MUST be applied consistently
from period to period, except where a change would result in
better estimates of MARKET VALUE.

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INTERNAL RATE OF
RETURN
(PRIVATE EQUITY)

Back 37

(IRR) is the annualized implied discount rate (effective compounded rate) that equates the present value of all the appropriate
cash inflows (PAID-IN CAPITAL, such as drawdowns for net
investments) associated with an investment with the sum of the
present value of all the appropriate cash outflows (such as DISTRIBUTIONS)
accruing from it and the present value of the unrealized
residual PORTFOLIO (unliquidated holdings). For an interim cumulative return measurement, any IRR depends on the valuation of the residual assets.

Front 38

INVESTED CAPITAL
(PRIVATE EQUITY)

Back 38

The amount of PAID-IN CAPITAL that has been invested in PORTFOLIO companies.

Front 39

INVESTMENT
ADVISOR
(PRIVATE EQUITY)

Back 39

Any individual or institution that supplies investment advice to
clients on a per fee basis. The INVESTMENT ADVISOR inherently
has no role in the management of the underlying PORTFOLIO
companies of a partnership/fund.

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INVESTMENT
MANAGEMENT FEE

Back 40

The fee payable to the investment management FIRM for the ongoing
management of a PORTFOLIO. INVESTMENT MANAGEMENT
FEES are typically asset based (percentage of assets), performance
based (based on performance relative to a BENCHMARK), or
a combination of the two but may take different forms as well.

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INVESTMENT
MULTIPLE
(TVPI MULTIPLE)
(PRIVATE EQUITY)

Back 41

The ratio of TOTAL VALUE to PAID-IN-CAPITAL. It represents the
TOTAL RETURN of the investment to the original investment not
taking into consideration the time invested. TOTAL VALUE can be
found by adding the RESIDUAL VALUE and distributed capital
together.

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LARGE EXTERNAL
CASH FLOW

Back 42

The Standards do not contain a specified amount of cash or
percentage that is considered to be a LARGE EXTERNAL CASH
FLOW. Instead, FIRMS MUST define the COMPOSITE-specific size
(amount or percentage) that constitutes a LARGE EXTERNAL CASH
FLOW.

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LIMITED PARTNER
(PRIVATE EQUITY)

Back 43

(LP) an investor in a LIMITED PARTNERSHIP. The GENERAL PARTNER
is liable for the actions of the partnership and the LIMITED
PARTNERS are generally protected from legal actions and any
losses beyond their original investment. The LIMITED PARTNER
receives income, capital gains, and tax benefits.

Front 44

LIMITED
PARTNERSHIP
(PRIVATE EQUITY)

Back 44

The legal structure used by most venture and PRIVATE EQUITY
funds. Usually fixed life investment vehicles. The GENERAL PARTNER
or management firm manages the partnership using the
policy laid down in a partnership agreement. The agreement
also covers terms, fees, structures, and other items agreed between the LIMITED PARTNERS and the GENERAL PARTNER.

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MARKET VALUE

Back 45

The current listed price at which investors buy or sell securities
at a given time.

Front 46

MARKET VALUE
(REAL ESTATE)

Back 46

The most probable price that a property SHOULD bring in a competitive and open market under all conditions requisite to a fair
sale, the buyer and seller each acting prudently and knowledgeably,
and assuming the price is not affected by undue stimulus.
Implicit in this definition is the consummation of a sale as of a
specified date and the passing of title from seller to buyer under
conditions whereby:
a. Buyer and seller are typically motivated.
b. Both parties are well informed or well advised and each
acting in what they consider their own best interests.
c. A reasonable time is allowed for exposure in the open market.
d. Payment is made in terms of currency or in terms of financial
arrangements comparable thereto.
e. The price represents the normal consideration for the property
sold unaffected by special or creative financing or sales
concessions granted by anyone associated with the sale.

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MUST

Back 47

A REQUIRED provision for claiming compliance with the GIPS standards. (See the term "REQUIRE.")

Front 48

NET-OF-FEES
RETURN

Back 48

The GROSS-OF-FEES RETURN reduced by the INVESTMENT MANAGEMENT
FEE.

Front 49

OPEN-END FUND
(PRIVATE EQUITY)

Back 49

A type of investment fund where the number of investors and the
total COMMITTED CAPITAL is not fixed (i.e., open for subscriptions
and/or redemptions). (See the term "EVERGREEN FUND.")

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OPEN MARKET
VALUE
(PRIVATE EQUITY)

Back 50

An opinion of the best price at which the sale of an interest in
the property would have been completed unconditionally for
cash consideration on the date of valuation, assuming:
a. a willing seller;
b. that prior to the date of valuation there had been a reasonable
period (having regard to the nature of the property
and the state of the market) for the proper marketing of
the interest, for the agreement of the price and terms, and
for the completion of the sale;
c. that the state of the market, level of values, and other circumstances
were on any earlier assumed date of exchange
of contracts the same as on the date of valuation;
d. that no account is taken of any additional bid by a prospective
purchaser with a special interest; and
e. that both parties to the transaction had acted knowledgeably,
prudently, and without compulsion.

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PAID-IN CAPITAL
(PRIVATE EQUITY)

Back 51

The amount of COMMITTED CAPITAL a LIMITED PARTNER has actually
transferred to a venture fund. Also known as the cumulative
DRAWDOWN amount.

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PIC MULTIPLE
(PRIVATE EQUITY

Back 52

The ratio of PAID-IN-CAPITAL to COMMITTED CAPITAL. This ratio
gives prospective clients information regarding how much of the total commitments has been drawn down.

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PRIVATE EQUITY

Back 53

PRIVATE EQUITY includes, but is not limited to, organizations
devoted to VENTURE CAPITAL, leveraged buyouts, consolidations,
mezzanine and distressed debt investments, and a variety of
hybrids, such as venture leasing and venture factoring.

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PROFESSIONALLY
DESIGNATED,
CERTIFIED, OR
LICENSED
COMMERCIAL
PROPERTY
VALUER/APPRAISER
(REAL ESTATE)

Back 54

In Europe, Canada and parts of southeast Asia, the predominant
professional designation is that of the Royal Institution of
Chartered Surveyors (RICs). In the United States, the professional
designation is Member [of the] Appraisal Institute (MAI).
In addition, each state regulates REAL ESTATE appraisers, and
based on one’s experience, body of work, and test results, is
then registered, licensed, or certified.

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REAL ESTATE

Back 55

REAL ESTATE Investments include:
• Wholly owned or partially owned properties,
• Commingled funds, property unit trusts, and insurance
company separate accounts,
• Unlisted, private placement securities issued by private REAL
ESTATE investment trusts (REITs) and REAL ESTATE operating
companies (REOCs), and
• Equity-oriented debt, such as participating mortgage loans
or any private interest in a property where some portion of
return to the investor at the time of investment is related to
the performance of the underlying REAL ESTATE.

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REALIZATION
MULTIPLE
(PRIVATE EQUITY)

Back 56

The REALIZATION MULTIPLE (DPI) is calculated by dividing the
cumulative DISTRIBUTIONS by the PAID-IN-CAPITAL.

Front 57

RESIDUAL VALUE
(PRIVATE EQUITY)

Back 57

The remaining equity that a LIMITED PARTNER has in the fund.
(The value of the investments within the fund.) Also can be
referred to as ENDING MARKET VALUE or net asset value.

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RESIDUAL VALUE TO
PAID-IN-CAPITAL (RVPI)
(PRIVATE EQUITY)

Back 58

RESIDUAL VALUE divided by the PAID-IN-CAPITAL.

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SETTLEMENT DATE
ACCOUNTING

Back 59

Recognizing the asset or liability on the date when the exchange
of cash, securities, and paperwork involved in a transaction is
completed. Impact on performance: Between TRADE DATE and
SETTLEMENT DATE, an account does not recognize any change
between the price of the transaction and the current MARKET
VALUE. Instead, on SETTLEMENT DATE, the total difference
between the price of the transaction and the current MARKET VALUE is recognized on that day.

Front 60

TIME-WEIGHTED
RATE OF RETURN

Back 60

Calculation that computes period-by-period returns on an investment
and removes the effects of EXTERNAL CASH FLOWS, which are
generally client-driven, and best reflects the FIRM'S ability to manage
assets according to a specified strategy or objective.

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TOTAL RETURN
(REAL ESTATE)

Back 61

The change in the MARKET VALUE of the PORTFOLIO, adjusted for
all capital expenditures (subtracted), net proceeds from sales
(added), and investment income accrued (added) during the
measurement period expressed as a percentage of the CAPITAL
EMPLOYED in the PORTFOLIO over the measurement period.

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TOTAL VALUE
(PRIVATE EQUITY)

Back 62

RESIDUAL VALUE of the PORTFOLIO plus distributed capital.

Front 63

TRADE DATE
ACCOUNTING

Back 63

The transaction is reflected in the PORTFOLIO on the date of the
purchase or sale, and not on the SETTLEMENT DATE. Recognizing
the asset or liability within at least 3 days of the date the transaction
is entered into (Trade Date, T+ 1, T+2 or T+3) all satisfy the
TRADE DATE ACCOUNTING REQUIREMENT for purposes of the GIPS standards.

Front 64

TRADING
EXPENSES

Back 64

The costs of buying or selling a security. These costs typically take
the form of brokerage commissions or spreads from either internal
or external brokers. CUSTODY FEES charged per transaction
SHOULD be considered CUSTODY FEES and not direct transaction costs. Estimated TRADING EXPENSES are not permitted.

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TRANSACTION
EXPENSES
(PRIVATE EQUITY)

Back 65

Include all legal, financial, advisory, and investment banking fees
related to buying, selling, restructuring, and recapitalizing PORTFOLIO
companies.

Front 66

VENTURE CAPITAL
(PRIVATE EQUITY)

Back 66

Risk capital in the form of equity and/or loan capital that is provided
by an investment institution to back a business venture that
is expected to grow in value.

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VINTAGE YEAR
(PRIVATE EQUITY)

Back 67

The year that the VENTURE CAPITAL or PRIVATE EQUITY fund or partnership
first draws down or calls capital from its investors.