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35 Cards in this Set
- Front
- Back
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Harmonic mean
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In a group of numbers, the harmonic mean is the reciprocal of the mean of the reciprocals (i.e. for numbers Xi, I=1...N, the harmonic mean = the sum from 1 to N of 1/Xi)
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Hedge funds
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Hedge funds comprise a wide class of investment vehicles, with mandates that include virtually any strategy that can be imagined. Hedge funds differ from mutual funds in that the former has much lighter regulation. Hedge funds differ from private equity funds in that the former tends to focus mostly on publicly traded securities, although the distinctions between these types of funds has blurred somewhat in recent years. With more liquid investments, hedge funds typically have much shorter lock-up periods for investors than do private equity funds.
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Historical return
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(=Realized return) The past return for an asset, fund, or manager.
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Hockey stick
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(=J-curve) On the x-axis, the number of years since a fund's vintage year. On the y-axis, the IRR of the fund up to that year. For successful funds, this curve takes the form of a hockey stick, with negative IRRs reported for early years (when management fees are paid out before any exits) and higher IRRs in later years (after the best exits have occurred).
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Human trials
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(=Clinical trials)
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Hurdle returns
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(=Preferred returns, =Priority returns) A preset level of returns that the fund must pay to investors before the GP can take any carried interest.
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Idiosyncratic risk
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(=Diversifiable risk)
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Implied GP valuation
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The implied valuation of the GP stake in an investment, based on the price paid in the most recent round.
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Implied LP valuation
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The implied valuation of the LP stake in an investment, based on the price paid in the most recent round.
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Implied partial valuation
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The implied valuation of the fund's stake in an investment, based on the price paid in the most recent round. Implied partial valuation = Implied GP valuation + Implied LP valuation.
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Infinite games
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Games with an infinite number of decision nodes for at least one player.
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Initial public offering (IPO)
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A company's first sale of securities in public markets. Historicallly, IPOs have been the most lucrative exits for VCs.
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In-kind distributions
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(=Stock distributions) The distribution of stock to limited partners. The alternative to an in-kind distribution is a cash distribution.
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Integrated markets
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When all investors can make investments in any country, we say that financial markets are integrated.
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Internal rate of return (IRR)
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Start with a stream of cash flows. Compute the NPV of these cash flows as a function of the discount rate. The discount rate that makes this NPV equal to zero is the IRR.
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In-the-money
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If the price of an underlying asset is above(below) the strike price for a call(put) option, we say that the option is in-the-money.
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Invested capital
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At any point during the life of a fund, invested capital is equal to the total amount of capital that has already been invested in portfolio companies. For a fund that has reached the end of its life, invested capital is equal to investment capital.
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Investment capital
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The difference between committed capital and lifetime fees.
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$investment
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The amount of cash invested by the fund in a specific round of investment.
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Investment multiple
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(=Absolute return, =Realization ratio, =Value multiple)
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In-the-money
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If the price of an underlying asset is above(below) the strike price for a call(put) option, we say that the option is in-the-money.
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Invested capital
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At any point during the life of a fund, invested capital is equal to the total amount of capital that has already been invested in portfolio companies. For a fund that has reached the end of its life, invested capital is equal to investment capital.
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Investment capital
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The difference between committed capital and lifetime fees.
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$investment
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The amount of cash invested by the fund in a specific round of investment.
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Investment multiple
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(=Absolute return, =Realization ratio, =Value multiple)
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Investment period
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(=Commitment period)
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Investment rate (IR)
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(=Plowback ratio, =Reinvestment rate) The percentage of a company's earnings that is reinvested into the capital stock of the company.
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Investor expropriation
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(=Expropriation, =Self-dealing, =Tunneling)
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Investor Rights Agreement
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The portion of the term sheet that lists any special rights of the investors.
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IPO
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Acronym for initial public offering.
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IR
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Acronym for investment rate
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IRR
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Acronym for internal rate of return
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IVpre
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Abbreviation for implied pre-valuation
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IVpost
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Abbreviation for implied post-valuation
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J-curve
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(=Hockey stick)
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