Glossary

AML (Anti-Money Laundering)

Laws and procedures aimed at preventing criminal proceeds from entering the financial system, including verifying who a client is and where their money comes from.

Alpha

The portion of a return that comes from a manager's own decisions, over and above what the broader market delivered. Used to judge active management rather than just market exposure.

Bond rating

A grade given to a bond by agencies such as Moody's, S&P or Fitch, indicating how likely the issuer is to make its payments. Investment-grade ratings signal lower risk than sub-investment-grade, or "high-yield", ratings.

Capital call (drawdown)

A request from a fund to an investor to pay in some or all of the capital they have committed, usually made as the fund finds opportunities to invest it.

Coupon

The interest payment a bond or loan pays, usually expressed as a percentage of its face value and paid on a fixed schedule.

Custodian

An institution that holds securities or assets on behalf of an investor or fund, separately from the manager, to protect against loss or misuse.

Cap rate (capitalisation rate)

In real estate, a property's annual net income divided by its purchase price, used as a quick measure of the income return an investment offers before financing costs.

Correlation

A measure of how closely two investments move together. Low or negative correlation between holdings is what makes diversification effective.

Credit spread

The extra yield a bond pays over a comparable government bond, to compensate the lender for taking on credit risk. Spreads widen when investors see more risk of default.

Distribution

A payment made to investors from a fund's income or from proceeds when it sells an underlying asset.

Duration

A measure of how sensitive a bond's price is to a change in interest rates. Roughly, a bond with a duration of seven years falls about 7% in price if yields rise by one percentage point.

Diversification

Spreading capital across different assets, sectors or regions so that a poor result in one holding does not determine the outcome for the whole portfolio.

Drawdown

The fall in value of an investment or portfolio from a peak to a subsequent low, usually expressed as a percentage. Distinct from a fund "drawing down" committed capital — see Capital call.

FATCA

A US law requiring financial institutions outside the US to identify and report accounts held by US persons to US tax authorities.

First lien / senior secured

A lender's claim on specific collateral that ranks ahead of other lenders' claims on the same assets if a borrower defaults.

Face value (par value)

The amount a bond will repay at maturity, and the reference amount its coupon is calculated on. A bond's market price can trade above or below face value before then.

Fund administrator

A firm that handles a fund's accounting, valuation and investor record-keeping, independently of the manager making the investment decisions.

General Partner (GP) / Limited Partner (LP)

In a fund structured as a limited partnership, the GP manages the fund and its investments; LPs are the investors, whose liability is generally limited to what they have committed.

High Net Worth Investor

An investor who meets a wealth or income threshold that qualifies them for products not offered to the general public. The exact threshold varies by country and region.

Hedge

A position taken to offset the risk of another position, such as using a derivative to reduce exposure to a currency or interest-rate move.

Illiquidity premium

The extra return an investor may earn for accepting that an investment cannot easily be sold or converted to cash for a period of time.

Investment grade

A credit rating of BBB-/Baa3 or above, indicating a relatively low risk of default. Ratings below this are often called high-yield or sub-investment-grade.

J-curve

The typical pattern in private equity and similar funds where returns are negative in the early years, due to fees and costs, before turning positive as investments mature.

KYC (Know Your Customer)

The process of verifying a client's identity and understanding their circumstances, typically including identity documents, address verification and source-of-funds checks.

LEI (Legal Entity Identifier)

A unique 20-character code that identifies a legal entity participating in financial transactions, issued under an international standard.

Liquidity

How quickly and easily an investment can be sold or converted to cash without significantly affecting its price.

Lock-up period

A set period during which an investor cannot sell or redeem an investment, common after an IPO or on entry into a fund.

Mark-to-market / mark-to-model

Mark-to-market values a holding at its current market price. Mark-to-model estimates value using assumptions and a valuation model, used when no reliable market price exists, as with many private investments.

Maturity

The date on which a bond or loan's principal is due to be repaid in full.

NAV (Net Asset Value)

The value of a fund's assets minus its liabilities, often expressed per unit or share, used as the basis for pricing entries and exits.

Open-ended vs closed-ended fund

An open-ended fund can issue and redeem units continuously as money enters and leaves. A closed-ended fund raises a fixed pool of capital upfront and does not take new subscriptions or pay out redemptions on demand; many private equity, real estate and infrastructure vehicles use this structure.

PEP (Politically Exposed Person)

Someone who holds, or has held, a prominent public position, or their close associate or family member. Their accounts typically receive extra scrutiny under anti-money-laundering rules.

Professional Investor

A classification, defined differently across jurisdictions, generally for investors with the experience and expertise to assess investment risk without the same protections given to retail investors.

Projection basis

The stated assumption behind a modelled figure, such as a target annual return or a coupon schedule. Shown on this platform alongside every projected value.

Preferred return (hurdle rate)

In a fund's waterfall, the minimum return investors receive before the manager starts sharing in profits.

Principal

The original amount invested or lent, before any interest, income or growth.

Redemption

Selling back units or shares in a fund to the fund itself, as opposed to selling them to another investor on an exchange.

Self-certification

A declaration an investor makes about their own status, such as qualifying as High Net Worth or Sophisticated. It is reviewed alongside an application, but the investor remains responsible for its accuracy.

Sophisticated Investor

An investor classification, defined differently across jurisdictions, generally for those with sufficient investment experience to understand the risks of complex or unregulated products without the protections given to retail investors.

Subscription

The act of committing capital to, or buying units or shares in, a fund.

Secondary market

A market where existing investors buy and sell securities among themselves, as opposed to the primary market where new securities are first issued.

Spread (bid-ask)

The gap between the price a buyer is willing to pay and the price a seller is asking for the same asset. A wider spread generally signals lower liquidity.

US person

A term used for FATCA and other US tax and securities purposes, generally including US citizens, green card holders and US tax residents, regardless of where they live.

Underwriting

The process by which a bank or syndicate prices and distributes new securities to investors, such as at an IPO or bond issuance, typically taking on some risk of the sale in the process.

Volatility

How much and how quickly an asset's price moves over time. Higher volatility means larger price swings, in either direction, and is a common proxy for risk.

Waterfall

The order in which a fund's proceeds are distributed among investors and the manager, typically returning investor capital and a preferred return before the manager shares in profits.

Yield

The income an investment produces, usually expressed as a percentage of its price or of the amount invested. For a bond, this reflects both its coupon and its current market price.