Funds

12b-1 Fee SEC-permitted annual marketing, distribution, and service charge embedded in a mutual fund's expense ratio, expressed as a percentage of assets.

12b-1 Fee in Mutual Funds Explained What a 12b-1 fee is, how it funds distribution and marketing, why it's embedded in expense ratios, and which share classes charge it most.

Absolute Return Fund A fund designed to generate positive returns regardless of market conditions by employing hedging and diversification strategies.

Accredited Investor vs Qualified Purchaser for Hedge Funds Accredited investors ($1M+ net worth) and qualified purchasers ($5M+ net worth) are two legal investor tiers for hedge funds. Learn which category you need under US securities law.

Active ETF An active ETF is an ETF managed by a portfolio manager who picks stocks rather than following a published index. Active ETFs aim to outperform their benchmark, but historically they have rarely done so net of fees.

Active Share: How Different Is Your Active Fund From Its Index? Active share measures what percentage of a fund's holdings diverge from its benchmark—a key metric for gauging whether active management is truly active.

Active Share: Measuring True Fund Activeness Active share quantifies what percent of a fund's portfolio differs from its benchmark. A high active share is necessary but not sufficient for outperformance.

Active vs Passive Fund Tracking Error How active managers intentionally deviate from benchmarks while passive funds track them closely, and what tracking error reveals about fund performance.

Actively Managed Fund A mutual fund where a portfolio manager selects individual holdings to outperform a benchmark through active trading decisions.

Actively Managed Transparent ETF An ETF where a fund manager picks holdings daily and discloses the full portfolio each day, unlike traditional mutual funds or opaque hedge funds.

Activist hedge fund A hedge fund strategy that takes significant stakes in companies and uses shareholder activism to drive operational or strategic changes.

Add-On Acquisition Strategy How PE-backed platform companies grow by acquiring smaller competitors to expand scale, geography, or product lines at lower multiples than the platform itself.

Alpha-Beta Separation in Hedge Funds Decomposing hedge fund returns into market-driven beta and manager skill (alpha) to evaluate whether fees are justified.

Asset Allocation Fund An asset allocation fund is a mutual fund or ETF offering a fixed or dynamic mix of stocks, bonds, and sometimes other assets. Asset allocation funds provide one-fund diversification across multiple asset classes.

Asset-Based Fund Fund that invests primarily in real or tangible assets like real estate, commodities, or infrastructure rather than stocks or bonds.

Authorized Participant An authorized participant (AP) is a large financial institution, typically a broker or market maker, licensed to create and redeem ETF shares. APs are essential to ETF mechanics, enabling efficient pricing and tight bid-ask spreads.

Balanced Fund A balanced fund is a mutual fund or ETF that holds both stocks and bonds in a fixed allocation, typically 60% stocks and 40% bonds. Balanced funds aim to provide one-fund simplicity for diversified investing.

Balanced Fund Strategy Investment fund that mixes equities and bonds to achieve moderate growth and steady income with reduced volatility.

Blank Check Fund vs SPAC: Key Differences Blank check fund vs SPAC: comparison of structure, investor rights, fees, and use cases for pre-deal investment vehicles.

Blend Fund An equity mutual fund holding both growth and value stocks, positioned in the middle of the style box between pure growth and pure value strategies.

Blind Pool A fund that raises committed capital from investors before the manager has identified specific investments, delegating deal selection entirely to the manager.

Blind Pool Fund A private equity fund structure where investors commit capital before the GP identifies any specific target assets, betting entirely on the GP's discretion and track record.

Bond ETF A bond ETF is a pooled investment vehicle that holds a basket of bonds and trades on an exchange like a stock. Bond ETFs let individual investors access fixed-income exposure with minimal cost and daily liquidity.

Buffer ETF A defined-outcome ETF that uses options to cap downside losses and upside gains over a fixed outcome period.

Buffer Fund A defined-outcome fund using options strategies to limit downside losses to a specified percentage over a fixed holding period, while capping upside gains.

Business Development Company A Business Development Company (BDC) is a publicly traded closed-end fund that lends to and invests in small and mid-sized private companies. BDCs offer high yields (7-10%) but with illiquidity and credit risk.

Buying a Mutual Fund Before Year-End Distribution Buying a mutual fund just before its annual capital gains distribution can immediately trigger a large tax bill on gains you never experienced.

Calmar Ratio Risk-adjusted return metric dividing annualized return by maximum drawdown, favored by commodity trading advisor analysis.

Capital Call A demand by a fund manager requiring investors to wire committed capital within a deadline, typically 5–10 days, to fund an acquisition or investment.

Capital Call Facility A subscription credit line that lets private equity funds draw bank debt before actually calling capital from limited partners, improving near-term IRR.

Capital Call vs Drawdown: How Private Funds Request Money Capital call and drawdown are the same event—when a private equity or hedge fund requests committed capital from investors—and timing is critical for cash-flow planning.

Capital Gains Distribution The annual payment to shareholders of the mutual fund's realized investment gains, creating immediate tax liability regardless of whether the investor holds the fund.

Capital Gains Distributions from Funds: Tax Explained Capital gains distributions from funds are taxable at short-term or long-term rates depending on the fund's holding period, not your own holding period.

Capital Preservation Fund A conservative fund investing primarily in Treasury bills, short-term bonds, and cash equivalents to return nominal principal with minimal volatility.

Capital Recycling Provisions in PE Fund Agreements Capital recycling provisions in private equity fund agreements allow GPs to reinvest early exit proceeds within the fund's investment period, expanding effective capital deployment beyond the original commitment.

Carried Interest Calculation Explained with an Example Numeric walkthrough of how private equity funds calculate carried interest after hurdle rate and high-water mark gatekeeping.

Carried Interest vs Dividend: How PE Profits Are Paid Understand the difference between carried interest and dividend distributions in private equity, and why the tax treatment of carried interest drives policy debate.

Carried Interest vs Management Fee: Key Differences Understand how fund managers earn money: management fees are fixed annual charges, while carried interest is a performance-based profit share.

Catastrophe Bond Fund Funds investing in insurance-linked securities where principal is at risk if a specified natural disaster occurs; higher yields offset principal exposure.

Catch-Up Provision in Private Equity Waterfalls A catch-up clause allows the GP to rapidly claim carried interest once the preferred return hurdle is cleared, recovering profits deferred during the ramp-up.

Choosing the Right Benchmark for a Mutual Fund Why an inappropriate benchmark flatters active managers, how to verify a fund uses a fair comparison, and what makes a valid benchmark.

Class A vs Class C Mutual Fund Shares: Breakeven Horizon How to calculate when a front-loaded Class A mutual fund share becomes cheaper than a Class C share with higher annual costs and surrender fees.

Clawback Provision A contractual clause that requires the general partner to return excess carried interest to limited partners if the fund underperforms across its full life.

Clawback Provision in Funds: How It Works Fund clawback provisions require GPs to return carried interest to LPs if a fund underperforms. How the mechanism works and what triggers a clawback.

CLO Fund Explained for Investors Collateralized loan obligation funds bundle corporate leveraged loans into tranches. Learn how credit losses cascade and why floating rates drive income.

Closed End Interval Fund Closed-end fund that offers periodic redemption opportunities, usually semi-annual or quarterly.

Closed-End Fund A closed-end fund is a fund with a fixed number of shares that trade on an exchange. Unlike open-end funds, closed-end funds do not issue or redeem shares; their price is set by supply and demand, often trading at discounts or premiums to NAV.

Closed-End Fund Discount to NAV Why closed-end fund market prices trade below net asset value, factors driving discounts, and investor implications.

Closed-End Fund Rights Offering Explained What a closed-end fund rights offering is, why managers issue them, and how shareholder dilution and compensation mechanics work in practice.

Closed-End Fund Tender Offer Mechanics How a closed-end fund tender offer works: the fund buys back shares at a premium, returning capital to shareholders at a discount.

Commingled Fund A pooled investment vehicle where institutional investors combine assets to reduce costs and access strategies unavailable at smaller scales.

Commodities Fund Fund providing exposure to raw materials such as oil, metals, and grain via futures, equities, or physical holdings for inflation protection.

Commodity ETF A commodity ETF is a pooled investment vehicle that gives investors exposure to commodities such as gold, oil, natural gas, or agricultural products. Most commodity ETFs hold futures contracts rather than physical commodities.

Commodity hedge fund A hedge fund strategy focused on trading commodities, commodity derivatives, and related securities to profit from price movements and supply-demand dynamics.

Comparing Fund Performance Across Vintage Years Why vintage year matters for fund performance comparison: how to benchmark funds launched in different economic cycles without timing bias.

Consequences of Defaulting on a Private Equity Capital Call What happens when a limited partner misses a PE capital call: interest, dilution, forced asset sales, and loss of distributions explained.

Continuation Fund A new PE vehicle created by the GP to hold portfolio companies beyond the original fund's term, avoiding forced liquidation.

Convertible Bond Arbitrage Profiting from pricing dislocations between convertible bonds and their underlying equities through delta-hedging.

Convertible Securities Fund A mutual fund that specializes in convertible bonds and preferred shares, blending fixed-income and equity exposure through securities with option-like features.

Converting Between Mutual Fund Share Classes How to move from a higher-cost share class to a cheaper one without triggering a taxable event, and the eligibility thresholds that apply.