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Funds: Private Equity, Hedge and All Core Structures by Matthew Hudson

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Appendix I

Definitions

GLOSSARY TERMS

Acquisition cost

The costs of all aspects of an acquisition, which include legal, accounting and any necessary registration fees or taxation

Advisory committee/investors committee

A committee or board made up of representatives of certain investors. The role of the advisory committee is limited to being consulted on matters such as conflicts of interest, approving exceptions to the investment restrictions and potentially certain other matters set out in the LPA and discussing the performance and operation of the fund. Their role in the management of a fund structured as a limited partnership is often restricted to avoid becoming a general partner

Alternative assets

A broad term covering potential investments outside of listed equities and bonds

Blind-pool fund

A fund where the investors’ capital is committed to be used in any investment. The investor cannot opt out of a specified investment and the fund is ‘blind’ as it has made no investments at the point of commitment

Carried interest

The private equity equivalent of the hedge performance fee. During the distribution, or ‘the waterfall’, following the return of capital to the investors and the payment of a preferred return to investors (usually 8% of capital, also known as the ‘hurdle rate’), the manager and its executives receive a percentage (usually 20%) of all profits thereafter with catch-up of the hurdle – i.e. the hurdle is a hurdle

Carry deed

The legal contract by which the carry ...

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