Private-Market Glossary: 120 Must-Know Terms for First-Time LPs

Understanding the Language of Private Markets

Private markets are governed not only by complex deal structures but also by a language all their own. For new limited partners (LPs), fluency in that language is a prerequisite for meaningful participation. Terms like "carried interest," "preferred return," and "GP catch-up" are more than jargon—they shape the way capital is deployed, profits are distributed, and relationships are structured. This glossary aims to decode the essential vocabulary used across private equity, venture capital, secondaries, and infrastructure funds. With cross-links to deeper content and downloadable context modules, it serves as a foundational resource for onboarding into the world of alternative assets.

What This Resource Covers

The glossary includes 120 core terms selected by CatalyX’s investment committee, compliance team, and education partners. Each entry goes beyond a dictionary definition to provide real-world context, historical background, and references to case studies or regulatory frameworks. Wherever applicable, entries also include synonyms and alert flags for regional variations—for example, how "distribution waterfalls" may differ under U.S. and EU structures. By embedding this terminology in a searchable, modular format, we aim to help LPs not only learn but apply concepts in real-time. The glossary is updated quarterly to reflect evolving market practices, ensuring that users stay ahead of shifting norms.

Private‑Market Glossary – 120 Essential Terms for First‑Time LPs

Below is an A–Z bullet‑point glossary. Each line gives the term first, followed by a concise, plain‑English definition that reflects current market practice.

• AIF (Alternative Investment Fund) — any collective investment vehicle that is not a UCITS, typically PE, VC, real estate or hedge funds.
• AIFM (Alternative Investment Fund Manager) — the regulated entity responsible for portfolio and risk management of an AIF under EU law.
• AIFMD Passport — the right for an EU AIFM to market an AIF across the EEA once authorised in one member state.
• Anchor Investor — an LP committing early and substantially, often securing fee breaks or advisory‑committee seats.
• Annex IV Report — the regulatory data file an AIFM must submit to its regulator (and ESMA) each quarter.
• Anti‑Dilution Protection — a clause that adjusts equity if new shares are issued below a set valuation (rare in PE, common in VC).
• Blind Pool — a fund where LPs commit capital before knowing specific assets the GP will buy.
• Bridge Financing — short‑term debt used until long‑term financing or capital calls are arranged.
• Broken‑Deal Cost — expenses incurred on deals that do not close, usually borne by the fund.
• Buy‑and‑Build — strategy of acquiring a platform company and add‑ons to gain scale and synergies.
• Capital Account — the running ledger of each LP’s contributions, allocations, fees and distributions.
• Capital Call (Drawdown) — GP’s request for a portion of committed capital to fund investments or expenses.
• Carried Interest (Carry) — GP’s performance fee, typically 20 % of profits above the preferred return.
• Catch‑Up Clause — section of waterfall giving GP nearly all profits after hurdle until its carry share is reached.
• Clawback — obligation for GP to return excess carry if later fund performance falls below agreed thresholds.
• Co‑Investment — direct deal allocation offered to LPs outside the main fund, usually at reduced or zero fees.
• Commitment Period — years during which the GP may call capital for new investments (often first 5 years).
• Concentration Limit — LPA rule capping % of fund that can be invested in a single asset or sector.
• Continuation Fund — new vehicle buying assets from an older fund to extend hold period and provide liquidity.
• Control Premium — extra price paid for majority ownership versus minority stake.
• Convertible Note — debt that converts to equity under preset conditions, frequently used in growth deals.
• Credit Facility (Subscription Line) — revolver secured on LP commitments to bridge short‑term funding needs.
• Cross‑Fund Investing — same GP’s different funds investing in one asset; requires conflict‑management policy.
• Data Room — secure online repository of diligence documents for LP review.
• Deal‑by‑Deal Carry (American Waterfall) — GP can take carry after each realised deal, subject to clawback.
• Delayed Draw Note — debt where borrower can draw funds in tranches over time.
• DPI (Distributions to Paid‑In) — cash returned to LPs divided by capital called; a real‑cash performance metric.
• Drag‑Along Right — allows majority holder to force sale of minority stakes in a full exit.
• Drawdown Schedule — projected timing and size of future capital calls.
• ESG‑Linked Carry — portion of carry contingent on meeting environmental, social or governance KPIs.
• EU Taxonomy — EU framework classifying environmentally sustainable economic activities.
• Exit Multiple — sale price divided by entry EBITDA; key driver of PE returns.
• Extension Option — GP right (often with LPAC consent) to extend fund life one or two years.
• Feeder Fund — vehicle pooling smaller investors into a master fund, often via platforms like Moonfare.
• First‑Close — initial closing date when the fund can start investing with early LP commitments.
• Follow‑On Investment — additional capital injected into an existing portfolio company.
• FOF (Fund‑of‑Funds) — vehicle investing in multiple underlying funds rather than directly in companies.
• GP (General Partner) — the fund manager making decisions and liable for management.
• GP Commit — personal capital GP team invests in its own fund, signalling alignment.
• GP‑Led Secondary — liquidity process where GP arranges sale or rollover of assets for existing LPs.
• Gross IRR — fund return before fees, expenses and carry.
• Hurdle Rate (Preferred Return) — minimum annual return LPs receive before GP earns carry, often 8 %.
• Hybrid Fund — structure mixing closed‑end PE elements with evergreen capital features.
• ILPA Principles — industry guidelines promoting transparency and best practice between GPs and LPs.
• Indemnification Cap — limit on GP’s liability for losses claimed by LPs.
• Internal Deal Team — GP employees sourcing and executing investments (vs. external advisers).
• Investment Period — same as commitment period; window to make new investments.
• IPO Lock‑Up — period post‑listing when shares cannot be sold.
• IRR (Internal Rate of Return) — discount rate setting NPV of cashflows to zero; annualised performance.
• J‑Curve — early negative IRR due to fees and unrealised value before exits boost returns.
• Key‑Person Clause — allows fundraising or investing suspension if named executives depart.
• LPA (Limited Partnership Agreement) — legal contract governing fund economics and governance.
• LP (Limited Partner) — investor in the fund with limited liability.
• LPAC (LP Advisory Committee) — small group of LPs advising GP on conflicts and extensions.
• Management Fee — annual charge (often 1.5 – 2 %) covering GP operating costs.
• Mandate Letter — document engaging placement agent or banker to raise capital or sell company.
• Material Adverse Change (MAC) — clause allowing deal renegotiation if major negative event occurs.
• Mega‑Fund — PE fund with commitments above €5 billion (threshold varies).
• Mini‑Maxi Close — fundraising structure with minimum and maximum fund size targets.
• MOIC (Multiple on Invested Capital) — total value / capital invested; measure of absolute return.
• NAV (Net Asset Value) — fair value of remaining portfolio plus cash minus liabilities.
• NAV Facility — loan secured on fund’s NAV, used for distributions or new deals.
• Net IRR — IRR after all fees, expenses and carry; the LP’s bottom‑line return.
• No‑Fault Divorce — LP supermajority right to remove GP or dissolve fund without cause.
• Pari Passu — equal rights and obligations among investors of the same class.
• Pay‑to‑Play — clause forcing investors to participate in follow‑ons or suffer dilution.
• Placement Agent — intermediary hired to raise capital from LPs.
• Platform Company — initial acquisition used to build a larger group via add‑ons.
• PME (Public‑Market Equivalent) — benchmarks PE performance against public index using synthetic cashflows.
• Portfolio Company — operating business owned by the fund.
• Post‑Money Valuation — company value immediately after investment including new equity.
• Preferred Equity — security ranking above common stock yet below debt, often with fixed return.
• Primary Fund — fund investing directly in companies (vs. secondary).
• Private Placement Memorandum (PPM) — detailed offering document given to prospective LPs.
• Pro Rata Right — investor option to maintain ownership percentage in future rounds.
• QIAIF — Irish qualifying investor AIF with flexible leverage and asset rules.
• Qualified Investor — meets wealth or sophistication threshold to invest in private funds.
• Quasi‑Debt — instruments like mezzanine or PIK notes combining debt and equity traits.
• Recapitalisation — restructuring company’s balance sheet, often adding debt and distributing proceeds.
• Recycling — GP’s ability to re‑use early proceeds for new investments.
• Reg‑D — U.S. exemption allowing private fundraising without SEC registration.
• Reporting Period — frequency of financial reporting to LPs (quarterly is standard).
• Reset Clause — renegotiation of fund terms if target raise not reached by deadline.
• Retention Pool — equity reserved for management incentives.
• Reverse Solicitation — LP approaches fund unsolicited, allowing limited marketing under AIFMD.
• Revlon Duties — board obligations to maximise sale price when company is up for sale.
• RGU (Revenue Generating Unit) — metric tracking subscribers or similar recurring‑revenue assets.
• Risk Rating — internal score assessing portfolio company volatility and leverage.
• Roll‑Up Vehicle — structure combining multiple assets under one holding for IPO.
• Rollover Equity — seller retains stake in new ownership structure, aligning interests.
• Secondary Buy‑Out — sale of a PE‑owned company to another PE fund.
• Secondary Fund — vehicle investing in existing fund interests or mature companies.
• Section 363 Sale — U.S. bankruptcy code transaction selling assets free of liabilities.
• Series A, B, C — successive VC funding rounds increasing in size and valuation.
• Side Letter — customised agreement granting special terms to an LP.
• Sustainable Finance Disclosure Regulation (SFDR) — EU rules requiring ESG disclosures for funds.
• Stapled Secondary — buyer acquires fund stake and commits to GP’s new vehicle simultaneously.
• Step‑Down — reduction of management fee percentage after investment period.
• Subscription Document — LP paperwork committing capital to the fund.
• Subscription Facility — see credit facility; debt secured on commitments.
• Sweat Equity — ownership earned through labour rather than cash investment.
• Tail‑End Portfolio — remaining assets late in fund life, often harder to exit.
• Tear‑Sheet — one‑page summary of fund or company performance metrics.
• Term Sheet — non‑binding outline of key investment terms.
• Trailing Twelve Months (TTM) — financial metric over the past 12 months.
• True‑Up — adjustment aligning economic interests when LPs join a fund after first close.
• Turnaround Strategy — investment thesis focused on operational fixes for distressed companies.
• TVPI (Total Value to Paid‑In) — (NAV + distributions) / capital called; overall multiple.
• Umbrella Fund — multi‑compartment structure sharing governance and admin services.
• Undrawn Commitment — pledged capital not yet called by the GP.
• Up‑Round — financing at higher valuation than previous round.
• Vintage Year — year the fund begins investing; used for performance benchmarking.
• Volcker Rule — U.S. regulation limiting bank investments in private funds.
• Waterfall — order in which fund distributions flow to LPs and GP.
• Write‑Down — reduction in the carrying value of a portfolio company.
• Write‑Off — complete loss recognition of an investment’s value.
• Zero‑Based Budgeting — cost‑cutting strategy requiring justification for every expense.

How to Use This Glossary

Each term entry links to deeper CatalyX content where users can explore the concept further—for example, comparing fund IRR vs. MOIC in an interactive chart, or downloading sample LPAs that show how different fee structures are negotiated. Tooltips are embedded in CatalyX dashboards for instant reference, and a downloadable PDF version is optimized for offline review. Whether used during onboarding, portfolio reviews, or investment committee prep, the glossary is designed for utility across all stages of the LP journey. Most importantly, it helps newer investors speak the language of private markets with clarity and confidence.