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Catch-up Rate: An accelerated rate of return paid to the manager after investors have received the Hurdle Rate and before payment of the Carried Interest share, which ensures that the manager’s total share of profits (taking into account payment of the Hurdle Rate to investors) equals the Carried Interest share.
Carried Interest or Carry: A share of fund profits paid to the manager after the investors have received back their invested capital plus the hurdle return on that capital.
Deal-by-deal: Where the Carried Interest (and Hurdle Rate) is calculated separately in respect of each individual investment of the fund. Often combined with other mechanisms (such as escrows, clawbacks and guarantees) designed to protect investors from an overpayment of Carried Interest to the manager.
ESG: Environmental, Social, and Corporate Governance refers to the three central factors in measuring the sustainability and societal impact of an investment.
GP Commitments: The amount of capital invested in the fund by the GP/manager, with the purpose of aligning the interests of the GP/manager with investors.
Hurdle Rate: The rate of return to which the investors are entitled before the manager earns its Carried Interest. Also commonly known as the ‘preferred return’.
Investment Period: In respect of closed-ended funds, the period during which the manager is entitled to draw down investors’ commitments for the purposes of making new investments. Also commonly known as the “Commitment Period”.
Key-person Provisions: The requirement for key people of the manager to devote time to the fund’s business and the consequences should they not do so.
Management Fees: The fee paid to the manager to compensate it for its management of the fund and its investments. This may be determined by reference to different bases (such as fund commitments, invested capital, net asset value or gross asset value) and at different rates, depending on the nature and strategy of the fund.
No-fault Divorce: The removal of the GP/manager from the fund without cause.
Redemption Gates: A restriction on the volume of total redemptions permitted from a fund in a given period.
Termination or Removal for Cause: Removal of the GP/manager by vote of the investors in instances where the GP/manager has through its actions or omissions given rise to cause for removal (for example, fraud, gross negligence, wilful misconduct, material breach of agreement).
Whole Fund: Where the Carried Interest (and Hurdle Rate) is calculated on an aggregate basis in respect of the entire investment portfolio of the fund.
Social Media cookies collect information about you sharing information from our website via social media tools, or analytics to understand your browsing between social media tools or our Social Media campaigns and our own websites. We do this to optimise the mix of channels to provide you with our content. Details concerning the tools in use are in our privacy policy.