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67 Cards in this Set
- Front
- Back
ACCRUAL
ACCOUNTING |
The system of recording financial transactions as they come into existence
as a legally enforceable claim, rather than when they settle. |
|
ADDITIONAL
INFORMATION |
Information that is REQUIRED or RECOMMENDED under the GIPS standards
and is not considered as "SUPPLEMENTAL INFORMATION" for the purposes of compliance. |
|
ADMINISTRATIVE
FEES |
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
|
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
|
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
|
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) |
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. |
|
CAPITAL RETURN
(REAL ESTATE) |
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) |
The profits that GENERAL PARTNERS earn from the profits of the
investments made by the fund (generally 20–25%). Also known as "carry." |
|
CLOSED-END
FUND (PRIVATE EQUITY) |
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. |
|
COMMITTED
CAPITAL (PRIVATE EQUITY) |
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
|
Aggregation of individual PORTFOLIOS representing a similar investment mandate, objective, or strategy.
|
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COMPOSITE
CREATION DATE |
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.) |
|
COMPOSITE
DEFINITION |
Detailed criteria that determine the allocation of portfolios to
COMPOSITES. COMPOSITE DEFINITIONS MUST be documented in the FIRM'S policies and procedures. |
|
COMPOSITE
DESCRIPTION |
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. |
|
COMPOSITE
INCEPTION DATE |
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.) |
|
CUSTODY FEES
|
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) |
An investment made directly in VENTURE CAPITAL or PRIVATE EQUITY assets (i.e., not via a partnership or fund).
|
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DISPERSION
|
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). |
|
DISTINCT
BUSINESS ENTITY |
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) |
Cash or the value of stock disbursed to the LIMITED PARTNERS of a venture fund.
|
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DRAWDOWN
(PRIVATE EQUITY) |
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) |
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) |
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
|
Before the fact.
|
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EX-POST
|
After the fact
|
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EXTERNAL
VALUATION (REAL ESTATE) |
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. |
|
FAIR VALUE
|
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
|
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) |
The date when a COMPOSITE is fully distributed.
|
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FIRM
|
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." |
|
GENERAL PARTNER
(PRIVATE EQUITY) |
(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.") |
|
GROSS-OF-FEES
RETURN |
The return on assets reduced by any TRADING EXPENSES
incurred during the period. |
|
GROSS-OF-FEES
RETURN (PRIVATE EQUITY) |
The return on assets reduced by any TRANSACTION EXPENSES
incurred during the period. |
|
INCOME RETURN
(REAL ESTATE) |
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. |
|
INTERNAL
VALUATION (REAL ESTATE) |
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. |
|
INTERNAL RATE OF
RETURN (PRIVATE EQUITY) |
(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. |
|
INVESTED CAPITAL
(PRIVATE EQUITY) |
The amount of PAID-IN CAPITAL that has been invested in PORTFOLIO companies.
|
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INVESTMENT
ADVISOR (PRIVATE EQUITY) |
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. |
|
INVESTMENT
MANAGEMENT FEE |
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. |
|
INVESTMENT
MULTIPLE (TVPI MULTIPLE) (PRIVATE EQUITY) |
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 |
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. |
|
LIMITED PARTNER
(PRIVATE EQUITY) |
(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. |
|
LIMITED
PARTNERSHIP (PRIVATE EQUITY) |
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. |
|
MARKET VALUE
|
The current listed price at which investors buy or sell securities
at a given time. |
|
MARKET VALUE
(REAL ESTATE) |
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
|
A REQUIRED provision for claiming compliance with the GIPS standards. (See the term "REQUIRE.")
|
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NET-OF-FEES
RETURN |
The GROSS-OF-FEES RETURN reduced by the INVESTMENT MANAGEMENT
FEE. |
|
OPEN-END FUND
(PRIVATE EQUITY) |
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.") |
|
OPEN MARKET
VALUE (PRIVATE EQUITY) |
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) |
The amount of COMMITTED CAPITAL a LIMITED PARTNER has actually
transferred to a venture fund. Also known as the cumulative DRAWDOWN amount. |
|
PIC MULTIPLE
(PRIVATE EQUITY |
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. |
|
PRIVATE EQUITY
|
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. |
|
PROFESSIONALLY
DESIGNATED, CERTIFIED, OR LICENSED COMMERCIAL PROPERTY VALUER/APPRAISER (REAL ESTATE) |
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. |
|
REAL ESTATE
|
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. |
|
REALIZATION
MULTIPLE (PRIVATE EQUITY) |
The REALIZATION MULTIPLE (DPI) is calculated by dividing the
cumulative DISTRIBUTIONS by the PAID-IN-CAPITAL. |
|
RESIDUAL VALUE
(PRIVATE EQUITY) |
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. |
|
RESIDUAL VALUE TO
PAID-IN-CAPITAL (RVPI) (PRIVATE EQUITY) |
RESIDUAL VALUE divided by the PAID-IN-CAPITAL.
|
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SETTLEMENT DATE
ACCOUNTING |
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. |
|
TIME-WEIGHTED
RATE OF RETURN |
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. |
|
TOTAL RETURN
(REAL ESTATE) |
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. |
|
TOTAL VALUE
(PRIVATE EQUITY) |
RESIDUAL VALUE of the PORTFOLIO plus distributed capital.
|
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TRADE DATE
ACCOUNTING |
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. |
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TRADING
EXPENSES |
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. |
|
TRANSACTION
EXPENSES (PRIVATE EQUITY) |
Include all legal, financial, advisory, and investment banking fees
related to buying, selling, restructuring, and recapitalizing PORTFOLIO companies. |
|
VENTURE CAPITAL
(PRIVATE EQUITY) |
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. |
|
VINTAGE YEAR
(PRIVATE EQUITY) |
The year that the VENTURE CAPITAL or PRIVATE EQUITY fund or partnership
first draws down or calls capital from its investors. |