The minimum rate of return an investment must clear before it is deemed worthwhile; in a fund, the return limited partners must receive before the sponsor earns a promote.
Related terms
- Income return
The portion of total return generated by net rental income relative to the capital invested, excluding any change in the asset's value.
- Internal rate of return (IRR)
The discount rate at which an investment net present value equals zero; a key return metric.
- Investment committee (IC)
The body that approves acquisitions and major decisions within an investment organisation.
- J-curve
The typical path of fund returns: negative early as fees and costs are drawn before value is created, then rising as investments mature and exit — the plotted…
- Limited partner (LP)
A passive investor in a fund whose liability and downside are capped at its committed capital and who has no role in day-to-day management.
- MOIC (multiple on invested capital)
Total value returned plus remaining value divided by capital invested; a gross measure of how many times the money has multiplied, ignoring time.
- Net asset value (NAV)
The value of a fund's or vehicle's assets minus its liabilities, often expressed per unit; the basis for pricing entries and redemptions in open-ended vehicles.
- Net initial yield
First-year NOI as a percentage of the total purchase price including costs.