Spreading capital across assets, sectors, or geographies whose returns do not move together to reduce portfolio risk without a proportional cut in expected return.
Related terms
- DPI
Distributions to paid-in capital: cash actually returned to LPs divided by capital they have contributed — the realised, cash-in-hand measure of fund performan…
- Due diligence
The investigation of an asset legal, physical, and financial condition before purchase.
- Equity multiple
Total cash returned divided by total cash invested over the hold period.
- Exit strategy
The planned method and timing for realising value from an investment, usually sale or refinance.
- Fund of funds
A vehicle that invests in a portfolio of other funds rather than directly in assets, giving investors diversification and access at the cost of an extra fee la…
- Fund vintage
The year a fund makes its first investment, used to benchmark its performance against other funds that began deploying in the same market conditions.
- General partner (GP)
The sponsor entity that manages a fund or deal, makes investment decisions, and bears unlimited liability; typically commits a small slice of capital alongside…
- GP catch-up
A waterfall tier after the preferred return where the sponsor receives most or all distributions until its share of total profit reaches the agreed promote per…