Funds

PE Fund Investment Period: Suspension and Termination PE fund investment period suspension and termination are triggered by key-person events, GP removal, or LP supermajority votes. Understand when a fund must stop investing.

Performance Fee A performance fee is a percentage of investment profits that a fund manager charges as compensation for outperformance. Performance fees align manager incentives with investor returns but can create perverse incentives for risk-taking.

Portable Alpha Strategy in Hedge Funds Portable alpha separates a manager's skill-driven returns from market beta exposure, then overlays the alpha onto a different asset class or benchmark via derivatives.

Portfolio Company Fees in Private Equity Monitoring, transaction, and board fees private equity GPs charge portfolio companies, and what LPs should watch for in fee structures.

Preferred Equity vs Common Equity in Private Equity Deals In PE transactions, preferred equity and common equity have different waterfall rights, liquidation preferences, and participation terms that determine who gets paid first.

Preferred Return Hurdle The minimum annual return threshold that limited partners must receive before the general partner earns any carried interest.

Preferred Return vs Hurdle Rate in Private Funds Preferred return and hurdle rate are distinct concepts in private equity. Preferred return guarantees LPs a baseline; hurdle rate triggers GP carried interest.

Prime Broker Margin Calls and Forced Liquidation in Hedge Funds How prime broker margin calls trigger forced liquidation in hedge funds, cascade effects, and systemic contagion explained.

Private Credit Fund vs Bank Loan Fund Private credit funds and bank loan funds both lend to corporates but differ in borrower creditworthiness, liquidity, and return drivers. Understand the distinctions.

Private Equity Co-Investment Direct equity investment by LPs alongside a PE fund in a single portfolio company, reducing fees and increasing alignment.

Private Equity Fund A private equity fund is a pooled investment vehicle that buys stakes in private companies, restructures them, and sells them for profit. Private equity funds target 20%+ annual returns but require long holding periods and are inaccessible to retail investors.

Private Equity Fund Life Extension: How and Why Funds Run Past Ten Years Learn how private equity funds extend their lifespans beyond the standard 10-year term, the LP consent process, and why GPs request extensions.

Private Equity Fund of Funds A vehicle that pools LP capital across multiple PE funds, providing diversification and access to top-tier GPs.

Qualified Purchaser vs Accredited Investor for PE Fund Access Why PE funds require qualified purchaser status ($5M minimum) rather than accredited investor status. The regulatory reason for the higher bar.

Quality Growth Fund A mutual or exchange-traded fund investing in companies with strong earnings growth and high financial quality metrics.

Quantitative hedge fund A hedge fund that uses mathematical models, statistical analysis, and algorithmic methods to identify trading opportunities and manage portfolios.

Real Asset Fund A fund investing in physical or inflation-protected assets including infrastructure, timberland, farmland, and commodities for diversification.

Real Estate Fund Fund investing in physical property, REITs, or real estate securities; offers diversified exposure to real estate returns with reduced capital requirements.

Real Estate Income Fund A non-listed pooled fund investing in income-producing properties, offering real estate exposure with lower liquidity than publicly traded REITs.

Recallable Distributions in Private Equity Funds Recallable distributions allow private equity funds to claw back previously distributed capital from LPs to cover follow-on investments or fund expenses, protecting the fund's cash position.

Recallable Distributions in Private Equity: When LPs Must Return Cash Recallable distributions allow PE GPs to claw back distributed proceeds to fund new investments or cover losses. How the recall works and why LPs must reserve cash.

Redemption In Kind: When Mutual Funds Pay With Securities What in-kind redemptions are, when large investors receive fund securities instead of cash, and the tax treatment that follows.

Redemption Restrictions Limitations on when or how often investors can withdraw money from a mutual fund, sometimes including holding periods or redemption fees.

Registered Investment Company The federal legal structure governing mutual funds, ETFs, and closed-end funds under the Investment Company Act of 1940.

Rehypothecation in Hedge Fund Prime Brokerage The prime broker's right to reuse pledged collateral and the counterparty risk it creates for clients.

Relative-value hedge fund A hedge fund strategy that profits from price discrepancies between related or similar securities by constructing long-short pairs to isolate specific mispricings.

Rights of Accumulation Mutual fund provision allowing prior holdings to count toward current purchase breakpoints, reducing sales charges on additional investments.

Risk Arbitrage Event-driven hedge funds that capture probability-weighted returns from mergers, acquisitions, and corporate restructurings.

Risk Parity Fund Fund allocating across asset classes based on equal risk contribution rather than equal dollar weighting.

Risk Parity Strategy A portfolio allocation approach that balances risk contribution across asset classes rather than dollar amounts.

Royalty Fund: How It Works How royalty funds acquire streams of music, pharmaceutical, and natural resource payments, and generate income from intangible assets.

RVPI (Residual Value to Paid-In) in Private Equity RVPI measures unrealized fund value relative to capital deployed. Learn how it signals portfolio maturity, realization risk, and fund exit activity.

Sales Charge Breakpoint Investment thresholds at which a mutual fund's front-end load percentage steps down, rewarding larger purchases with lower sales costs.

Schedule K-1 Tax Reporting for Hedge Fund Investors Why hedge fund investors receive K-1 forms instead of 1099s, what items appear on them, and how to handle late reporting at tax time.

Search Fund An investment vehicle where a searcher raises capital to locate, acquire, and operate a single private company.

Secondaries Fund Investment funds that buy existing limited-partner stakes in private equity or venture funds from original investors at a discount, creating liquidity.

Secondary Private Equity Fund: How It Works How secondary private equity funds buy existing LP interests at discounts, the J-curve mechanics, and their role in PE portfolios.

Sector ETF A sector ETF is an ETF holding stocks from a single industry or sector, such as technology, healthcare, financials, or energy. Sector ETFs let investors concentrate exposure in industries they believe will outperform.

Sector Fund A mutual fund that invests exclusively or primarily in companies within a specific economic sector such as technology, healthcare, or financials.

Sector-Specific Fund A fund that concentrates holdings on stocks in a single industry or economic sector.

Securities Lending in ETFs How ETF managers lend underlying securities to short-sellers and other borrowers to generate revenue that reduces the fund's net expenses.

Securities Lending Risk in ETFs ETF providers lend portfolio securities to generate fee income. Counterparty risk arises if the borrower defaults. Collateral and regulatory oversight limit exposure, but residual risk remains.

Semi-Transparent ETF A semi-transparent ETF is an actively managed ETF that discloses its holdings only after a delay rather than daily. This allows portfolio managers to conceal their positions from traders and competitors.

Separately Managed Account A direct-ownership investment account where a professional manager buys and holds securities on behalf of a single client.

Series Trust Structure A regulatory framework allowing a single investment company to operate multiple distinct mutual funds as separate legal series under one registration.

Sharia-Compliant Fund A fund structured under Islamic finance principles, excluding interest income and investing in halal-screened businesses that meet Islamic law standards.

Sharpe Ratio Limitations in Hedge Funds Why standard Sharpe calculations misrepresent risk for strategies with non-normal return distributions and hidden tail exposure.

Short-Duration Bond Fund A fixed-income fund designed to limit average maturity, reducing interest-rate sensitivity while preserving capital stability.

Short-Seller Activism Publishing negative research on target companies to amplify stock declines and profit from short positions.

Side Pocket A segregated account holding illiquid or hard-to-value assets separately from a fund's main liquid portfolio, isolating valuation risk and redemption disruptions.

Side Pocket Arrangements in Private Equity and Hedge Funds Side pocket arrangements segregate illiquid or controversial investments into separate accounts, insulating core portfolios but raising transparency and fairness concerns for limited partners.

Single-Stock ETFs: Structure, Leverage, and Risk Single-stock ETFs track one company or offer leveraged/inverse exposure to a single stock. Daily rebalancing can amplify losses. Understand the mechanics and regulatory backdrop.

Small-Cap ETF An ETF that holds stocks of smaller companies with market capitalizations between $300 million and $2 billion, offering growth potential with higher volatility than large-cap.

Small-Cap Growth Fund A fund targeting smaller, high-growth companies with above-average earnings expansion, accepting volatility for long-term return premiums.

Smart Beta ETF A smart beta ETF is an ETF that weights holdings according to factors other than market capitalization, such as dividend yield, value, momentum, or equal weighting. Smart beta strategies aim to outperform cap-weighted indices at similar cost.

Socially Responsible Fund A mutual or ETF fund that screens investments for ethical criteria such as weapons, tobacco, and human rights, excluding companies that conflict with stated values.

Soft Close vs Hard Close in a Fund Understand the difference between soft close vs hard close fund strategies—how managers manage capacity and new investor inflows.

Soft Dollar Arrangements When fund managers direct brokerage commissions to pay for research, technology, and trading services instead of writing checks, using the fund's trading volume as currency.

Soft Hurdle vs Hard Hurdle in Hedge Fund Fee Structures Understand how soft and hard hurdles determine when hedge fund managers earn performance fees and how each aligns incentives differently.

Soft Lock-Up vs Hard Lock-Up in Hedge Funds A soft lock-up allows early exit from a hedge fund but charges a penalty fee. A hard lock-up prohibits withdrawal entirely until the lock period expires.