Glossary Archive | Adams Street Partners

A

Accredited Investor

An accredited investor is an individual or entity that is deemed to be financially sophisticated and/or meets certain income or net worth thresholds. An accredited investor is an individual with (i) a net worth in excess of $1mm (excluding the value of a primary residence) or (ii) an individual income of at least $200k (or a joint income with spouse of at least $300k) for the two most recent years and with a reasonable expectation of achieving meeting such income thresholds in the current year. Qualification as an Accredited Investor may allow them to participate in certain types of investment opportunities that are not available to the public, such as IPOs or sales of shares in private companies, known as a private placement.

Acquisition

The obtainment of control, possession or ownership of a company, including obtaining minority positions in such company.

Alpha

Measurement of an investment's performance against a benchmark, index or other reference point and which shows excess return due to active management. Positive alpha indicates outperformance, negative alpha indicates underperformance. Alpha is one measurement that can help in assessing a manager’s skill in generating returns.

Alternative Investments

Investment opportunities beyond traditional stocks, bonds, ETF, mutual funds and cash, including hedge funds, private equity, private credit, real estate, commodities, art, and other assets. Alternative investments typically have lower correlation with public equity and bond markets and offer diversification and the potential for higher returns. Alternative investments may have structures that are more complex, and there is less regulatory oversight and lower liquidity versus publicly traded investments. Past performance is not a guarantee of future results; investments are subject to loss, including a complete loss, of capital.

Angel Investor

A wealthy individual or company that invests in early-stage companies or startups.

AUM | Assets Under Management

The total value of assets managed by a financial institution or investment manager on behalf of clients. In some circumstances, the calculation of AUM may differ based on certain regulatory reporting standards, the inclusion of leverage and other factors.

B

BDC | Business Development Company

An investment company open to retail investors that provides capital to small- and mid-sized businesses, typically via loans.

Benchmark | Index | Reference Point

A standard, often an index representing a market, or an average of some subset of investments, and that is used to help evaluate the performance of an investment manager by comparing against specific investments chosen, or portfolios developed by, such investment managers.

Bridge Financing

Short-term financing typically used by businesses to meet immediate financial obligations until a more permanent financing arrangement can be secured. Bridge financing is commonly used in situations where immediate funding is needed, for example in real estate transactions and mergers and acquisitions.

Buyout Fund

Pools of capital that provide investment managers with equity capital typically used to acquire majority control of companies.

C

Capital Call

Also known as a draw down, a request from an investment fund to its investors for previously pledged funds to meet investment commitments or to cover operating expenses, which investors are required to provide within a specified period.

Capital Gains

The profit generated by an investment or asset. Gains can be realized (when the asset is sold), or unrealized (the increase in value of an asset that hasn’t been sold). Short-term capital gains refer to the profit made on an asset held for less than a year and are typically taxed at ordinary income tax rates. Long-term capital gains are the profits made on an asset held for more than a year and are taxed at a lower rate versus ordinary income.

Capital Structure

How a company finances operations using a mix of debt, equity, and other funding sources. The capital structure plays a crucial role in determining a company’s overall risk profile and cost of capital.

Carried Interest

Commonly referred to as “carry,” this is a share of profits that investment managers can receive as compensation for managing investments on behalf of investors. Typically, carried interest is expressed as a percentage of the profits earned by an investment fund after reaching a predetermined threshold, known as a “hurdle”.

Club Deal

A transaction involving more than one, and typically several, investors.

Co-Investment

An investor(s) taking a minority position directly in a company alongside a lead private equity manager.

Commitment

A limited partner's obligation to provide up to a pre-determined amount of capital to a fund.

Covenant

A protective clause in a loan agreement that can take the form of one of the following: (i) negative covenants – these outline activities that the company is restricted/limited from engaging in (e.g. selling assets), (ii) financial covenants – these require the company to “maintain” a certain level of operating performance, and (iii) affirmative covenants – these describe provisions that a business must follow (e.g. maintain in compliance with regulations). A covenant breach will trigger a default, which, if left unaddressed, will allow the lender(s) to exercise their rights including to demand immediate repayment of the loan, foreclose on the assets, or to force a reorganization of the borrower’s capital structure.

D

Direct Investment

An equity or debt investment directly in a company rather than via a fund.

Direct Lending

The origination of debt financing by private credit funds without banks. Direct lending strategies establish direct relationships with companies and/or fund private equity sponsors to make investments and provide various debt instruments and customized deal structures.

Distribution

Payments, typically in cash (although a “distribution-in-kind” of securities may be permissible), to investors in a fund. Distributions take place when the fund manager either fully or partially realizes investments in a portfolio company or asset or receives interest repayments from a borrower in a private credit fund.

Diversification

Spreading investments across asset classes, vintage years, geographies, sectors, investment managers, company size, or other factors. Diversification typically helps to manage risk in a portfolio and provide downside protection.

DPI | Distributions to Paid-in Capital

The amount a fund has distributed to investors relative to the total capital contribution to the fund. A DPI of 1.0 indicates that an investment has returned all of an investors’ paid-in capital. A DPI of greater than 1.0 suggests that the investment has returned the initial investment, plus returned additional capital beyond the initial investment to its investors.

Dry Powder

Uninvested capital held by investment firms.

Due Diligence

An analysis carried out prior to committing capital to a fund or portfolio company to determine its desirability and value as an investment.

E

Early Stage Investing

Investing, including via a venture capital fund, into the initial phase of a company’s growth, usually to support product development and initial marketing, manufacturing and sales activities. Usually includes the seed and Series A funding rounds, where a company may have a novel idea and/or product but has yet to establish a revenue stream.

EBITDA

A financial metric that includes earnings but excludes non-operating expenses such as interest, taxes, depreciation, and amortization to provide a clearer view of operational profitability. Companies are often valued based on a multiple of their EBITDA.

Exit Strategy

A fund or company's plan to generate cash proceeds. Common exit strategies include a trade sale, a sale to another general partner, an IPO, a secondary market sale, a recapitalization, or a merger with a competitor.

F

Fair Value

The amount at which an asset can be sold in a transaction between willing parties, other than in a forced or liquidation sale.

Feeder Fund

A fund that invests a substantial portion of its pooled assets into a master fund. Feeder funds may be established for a variety of reasons, including to offer investors access to strategies at lower investment minimums, advantages related to tax efficiency, regulatory compliance, currency hedging and operational simplicity, especially where underlying investors are from a variety of jurisdictions.

First Stage/Round Financing

The first round of financing following a company's startup phase that often (but not necessarily) involves a venture capital fund.

Follow-on Investment

A follow-on investment is capital provided by an investor in addition to, and in excess of, amounts the investor has previously committed to the company, often in an earlier financing round. It indicates ongoing confidence in the company's potential growth and development.

Fund Administrator

A third-party entity that offers operational support services to investment funds, handling tasks including fund accounting, investor servicing, financial reporting, and regulatory compliance. By maintaining accurate records, the fund manager can concentrate on investment decisions.

Fund of Funds

A fund that commits capital to a portfolio of other funds. A primary fund of funds is focused on investing in funds that are in their fundraising period (i.e., have not held their final close), and may have made a limited number of (or no) investments. A secondary fund of funds is focused on acquiring interests in existing funds that are outside of their fundraising period (i.e., have held their final close) and where there may be significant visibility into the portfolio.

G

GP | General Partner

Typically, a private markets firm responsible for the day-to-day operations of the partnership, including making investment decisions related to any assets held by the partnership. GPs aim to generate returns for LPs (investors) by investing partnership assets in a portfolio of private equity, private credit or other private market investment opportunities.

Gross Performance

The return on an investment before subtracting fees (including management fees and carried interest), expenses, or taxes. Gross performance reflects the raw, unadjusted performance of an investment without considering additional costs that may affect the return.

Growth Equity

Direct investments into rapidly expanding, established companies positioned between early and pre-IPO stages with the aim of increasing such companies’ size and value.

H

Horizon Return

An Internal Rate of Return calculation between points in time where the beginning point is variable and the end point is fixed. An example would be the three-, five-, and 10-year returns ending 12/31/24, with 12/31/24 as the end point and beginning points, respectively, of 12/31/21, 12/31/19 and 12/31/14.

I

Inception

The point at which a fund begins investment operations and Internal Rate of Return calculations are calculated.

Investment Horizon

The amount of time an investor plans to hold an investment before selling it. To achieve optimal outcomes, investment horizon should have a substantial influence on an investor’s strategy, risk tolerance, return expectations and decision-making processes.

IPO | Initial Public Offering

The sale of a company’s stock to the public for the first time.

IRR | Internal Rate of Return

Essentially, a metric used to measure the performance of a closed-end private markets fund by considering the timing and size of its cash flows. This is a key metric in the private markets industry that represents the discount rate that makes the net present value (NPV) of future cash flows from an investment equal to zero. IRR is typically presented as an annualized figure and used by investors to measure the performance of a fund or investment over time.

J

J-curve

A graphical representation of the typical private equity fund’s performance over time Returns are typically negative during initial years as capital is called from investors and deployed into companies. As investments mature and managers exit investments, fund performance and the cash flows generated from investments improve and typically turn positive. This pattern of negative initial returns, followed by a subsequent positive slope as performance generates positive returns over time resembles the letter “J”, giving it its name. Past performance is not a guarantee of future results; investments are subject to loss, including a complete loss, of capital.

L

Later Stage Investing

Investing in companies that are usually more established than seed or early-stage enterprises, with proven business models and revenue generation, making them typically less risky. Later-stage companies can include those in the growth equity range, comprising Series C and later. Later-stage investors typically seek to capitalize on the growth potential of established businesses by providing capital to scale operations, or to pursue initiatives such as international expansion or strategic acquisitions.

LBO | Leveraged Buyout

The purchase of a controlling share in a business using a combination of equity and debt capital, typically backed by the assets or cash flows of the acquired company.

Leverage

The utilization of borrowed funds to potentially boost potential investment returns. Leverage amplifies both the risk of loss and the potential for higher returns.

Limited Partnerships

In the context of private market investing, a limited partnership is typically an investment vehicle comprising capital contributed by the General Partner and Limited Partners (GP, LPs). The GP manages the partnership according to the Limited Partnership Agreement (LPA), which specifies terms, fees, structures, and other agreed-upon items, such as a termination date. LPs provide capital and share in profits based on their investment level. Limited partnerships are commonly used in private markets due to their flexibility in governance and tax treatment compared with other business structures.

LP | Limited Partner

An investor in a limited partnership who has limited liability and typically does not participate in the day-to-day management or operations of the partnership, including decisions related to portfolio assets, which are managed by the partnership’s GP. An LP’s liability is typically limited to the amount of its capital commitment.

M

Management Fee

A recurring annual fee paid to a fund’s investment manager to provide working capital in exchange for managing a fund's activities, including certain overhead expenses of the investment adviser such as personnel, office space, and administrative, accounting, legal and IT services.

Mezzanine Debt

Intermediate capital between equity and senior debt in a capital structure, usually provided in acquisition or refinancing transactions. While structured as a loan, mezzanine debt can include equity-like characteristics, such as warrants, options, preferred stock and conversion rights, that provide the lender with additional upside potential. Because it is subordinate to senior debt, mezzanine funding carries higher risk. Investors therefore typically require a return premium to compensate them for the additional risk they bear.

MOIC | Multiple on Invested Capital

Multiple on Invested Capital is a metric used to measure the return on an investment by comparing the total value of the investment (inclusive of what has been realized and what is unrealized) to the amount invested. A value above 1.0 signifies a positive return, with higher values indicating greater returns relative to the investment.

Multi-Stage Venture Capital Fund

An investment strategy that invests in a portfolio of companies at various stages of development, such as seed, early, late stage and growth.

N

NAV | Net Asset Value

The sum value of an investor’s interest in a fund at a given time. It is calculated as the sum of all assets in a fund minus the liabilities of the fund.

Net Performance

With respect to private markets funds, the return on an investment after subtracting all fees (including management fees and carried interest), and expenses related to the investment at the fund level. Net performance reflects the actual profit or loss realized by an investor, accounting for all associated costs.

P

Paid-in Capital

The amount of committed capital a Limited Partner has contributed to a fund. Also known as the cumulative takedown amount.

PME | Public Market Equivalent

Used as a reference point to compare the performance of an investment in a private fund versus those of a public market index, such as the S&P 500 or MSCI ACWI. A PME simulates the growth of an equivalent public market investment with the same cash flows and timing as the private investment, aiding the comparison and evaluation of the private investment's performance against public market investments.

Portfolio Company

A business in which an investment fund holds debt or equity.

Preferred Return

Also known as “hurdle rate,” a contractual agreement between investors and a fund’s General Partner to ensure that investors receive a specific rate of return on their invested capital before the manager participates in profits. Past performance is not a guarantee of future results; investments are subject to loss, including a complete loss, of capital.

Primary Investments

Commitments by a fund formed for the purpose of making investments into other investment vehicles, and where such commitments are typically made during the fundraising period for such investment vehicles’. Primary investments are sometimes referred to as blind pool commitments as the manager has not yet begun to deploy capital in portfolio companies.

Private Credit

Private credit comprises non-bank lending of illiquid, unrated debt. While typically provided to fund the debt component of leveraged buyouts, private credit provides a wide spectrum of debt finance options with various risk/return profiles to meet the diverse and complex needs of borrowers and investors. A private credit fund offers financing to companies through non-publicly traded debt instruments. These funds often focus on lending to middle-market or non-traditional financing-seeking companies, providing various debt structures with different risk profiles. Investors aim for income from interest payments and potential capital appreciation upon successful loan repayment.

Private Equity / Private Equity Fund

Equity investments made directly into privately held companies, ranging from start-ups to mature businesses with proven profitability. A private equity fund pools capital from multiple investors to deploy in private companies. These funds aim to generate returns by acquiring equity stakes in various opportunities. Managers of private equity funds seek to add value to portfolio companies through active management and strategic guidance to achieve profits upon exit.

Private Markets

Investments in non-publicly listed entities, including private equity, venture capital, real assets, private credit and other alternative investments. Limited liquidity and potential for higher returns distinguish private market investments. Past performance is not a guarantee of future results; investments are subject to loss, including a complete loss, of capital.

Q

Qualified Client / Purchaser

An individual or institution that meets eligibility thresholds to participate in private markets investments. Thresholds are at least $5 million in net investment assets for an individual (as well as certain trusts and closely held companies), and at least $25 million in net investment assets for an institution.

Quartile

Segment of a sample representing a sequential quarter (25%) of the group (e.g., the first 10 out of 40 funds equals the first quartile, etc.)

R

Realization

When an investor receives cash or securities from an investment, which may be achieved as a result of the sale of assets of a company, a liquidation event, or repayment of a debt obligation.

Realized Value

The total cash received from investments at a specific point, excluding unrealized gains or losses.

Residual Value

The remaining Net Asset Value that an investor has in a fund.

Restructuring Partnership/Distressed Debt Partnership

A restructuring partnership injects equity into distressed companies. A distressed debt partnership buys the debts of such companies.

RIC | Registered Investment Company

A pooled investment vehicle governed by the U.S. Investment Company Act of 1940 and regulated by the U.S. Securities and Exchange Commission.

S

Secondary Investments

Generally, the purchase of interests in either private funds or specific assets inside such funds (e.g., portfolio companies). Since most secondary transactions take place after some passage of time following initial primary investment commitments to funds, secondaries buyers typically purchase portfolios of existing funded assets in funds while also assuming any remaining unfunded commitments to the same funds.

Seed Stage Investing

An investment strategy involving acquiring interests in portfolio companies that have not yet fully established commercial operations and may also involve continued research and product development.

Special Situations

Funds with a specific industry focus, or unique opportunities falling outside regular investment categories. Special situations can include restructurings, turnarounds, distressed debt investments, and other non-traditional investment scenarios. These strategies aim to capitalize on mispriced assets or market inefficiencies to generate returns.

Subscription Line

A revolving line of credit secured by future fund commitments made by LPs. A subscription line allows a private fund manager to draw funds to make investments or to cover expenses related to portfolio companies while waiting to receive investor contributions. The use of a subscription line is a form of leverage, and therefore, as discussed above in “Leverage,” has the potential to increase stated returns to investors as investor capital is used for a shorter period of time but may also increase the risk of loss.

T

Trade Sale

Sale of a portfolio company to another private equity sponsor or another company operating within the same or related industry as the portfolio company.

Turnaround Financing

Financing provided to a company at a time of operational or financial difficulty with the intention of improving performance.

TVPI | Total Value to Paid In

The ratio of the current value of remaining investments within a fund, plus the total value of all distributions to date, relative to the total amount of capital paid into the fund to date. One of the best available measures of performance before the end of a fund’s life.

TWR | Time-Weighted Returns

A measure of investment performance that focuses solely on a portfolio's growth rate, eliminating the distorting effects of changes in cash flows. Time-weighted returns (TWR) provide an evaluation of an investment manager’s skill and asset performance, independent of timing and cash flow sizes. TWR can be particularly well-suited for measuring the performance of evergreen funds due to their ability to isolate the manager's decision making from external factors such as investor contributions and withdrawals. In the context of evergreen funds, where capital may flow in and out regularly without set fund maturity dates, TWR offers a fair and unbiased assessment of the fund's investment performance.

U

Unrealized Value

The estimated remaining fair value of an investment that has yet to be realized/liquidated. Unrealized value reflects the General Partner's assessment of value based on company performance, market conditions, and potential transactions.

V

Venture Capital Fund Focus (Investment Stage)

The indicated area of specialization of a venture capital fund usually expressed as Balanced or Multi-Stage, Seed, Early Stage or Later Stage.

Vintage Year

The year when a fund begins its investments. Vintage year serves as a key marker for tracking fund performance, characteristics, and market comparisons within the investment industry. Vintage years are vital for analyzing investment returns, risks, and market trends over time.

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Glossary

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