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17 Cards in this Set
- Front
- Back
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Periodic Returns
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The return for a period is the value of the portfolio at the end of the period, plus the dividends, all divided by the beginning value. Then subtract 1.
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Compound Return
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A periodic return calculated by multiplying the subperiod returns
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Annualized Return
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An asset return expressed on a per year basis
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Gross Returns
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Returns before subtracting fees and carried interest
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Net Returns
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Returns after subtracting out fees and interest
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Realized/Historical Returns
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Returns that have been earned in the past
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Expected Returns
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Returns that are forecast for the future
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Gross Return Index
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Sand Hill Econometrics (SHE), Susan Woodward's company, developed a GRI called the Snad Hill Index that tracks the gross returns of 17,000 companies and more than 60,000 financing rounds; built from a database of portfolio companies
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Net Return Index
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Built with a database of funds and combine the returns of these funds to form an overall index (the VC funds rather than the portfolio companies); the example is the Cambridge Associates (CA) index
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Gatekeeper
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A consultant who advises the LPs on their fund investments
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Survivor Bias
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A statistical bias caused when the data sample includes a disproportionate number of entries from surviving entities
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Internal Rate of Return
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The discount rate that makes the NPV equal to zero; effectively weighs each dollar equally
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Weaknesses of IRR Measure
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(1) May not be compared to periodic returns as it takes into account time value of money and investment duration
(2) Some standard practices may lead to confusion, such as annualizing IRR (3) IRR does not usually make a distinction between realized and unrealized investments (4) Particularly misleading in the early years of the fund- overweights fees and expenses |
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J Curve or Hockey Stick
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For successful funds, the curve takes this form, with negative IRRs reported for early years and higher IRRs in later years; the x-axis is the number of years since vintage and the y-axis is the IRR of the fund up to that year
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Value Multiple
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Also known as the investment mult., realization ratio, absolute return, multiple of money, times money.
The amount distributed to the limited partners of the fund expressed as a multiple of each dollar contributed by the partners; consists of both a realized and unrealized portion; generally presented net of fees |
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Gross Value Multiple
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The value multiple presented on a gross basis; useful for quick calculation of raw investment returns
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Top-Quartile Fund
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A fund with an IRR among the top 25% of all funds in the same vintage year
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