Unfamiliar with some of the private markets lingo? 

Reference the glossary below as you continue on your evergreen journey.


Benchmark: A point of reference against which the performance of a fund is measured. The benchmark can be a comparison to the performance of other similar funds, a specific threshold return, or a public market index.

Capital Call/Drawdown/Paid In-Capital: A capital call, also known as a drawdown, is where the general partner (“GP”) of a fund calls on LPs to supply a portion of the amount of capital they committed at the beginning of the investment. The timing and amount are at the GP’s discretion, and once capital has been called, it is considered “paid-in capital.”

Carried Interest/Incentive Fee/ Performance Fee: Carried interest is a percentage of the profits, usually between 10-20%, that a GP earns if the investment makes a return above a certain threshold (i.e., the hurdle rate). Carried interest is often also called an “incentive fee” or “performance fee.

Cash Drag: Cash drag is the result of a portfolio holding a portion of its assets in cash instead of higher returning assets. Cash drag can have an adverse impact on a fund in rising market environments.

Co-Investment: A co-investment is an investment by an LP alongside a GP directly into the underlying investment, outside of the GP’s traditional fund structure. 

Committed Capital vs. Invested Capital: Committed capital is the amount the limited partner has pledged to the fund over the entire life of the investment. Invested capital is the amount that has already been called by the GP to make investments or generally operate the fund. 

Distributions: Distributions are any cash or stock that has been paid out to the limited partners from the fund. 

Distributions to Paid-In Capital (“DPI”): DPI is calculated by dividing the cumulative distributions an investor has received by the amount of paid-in capital. This can provide the investors with some insight into how much of the fund’s return has actually been “realized” or paid out to investors.

Exit: Exit is the process of liquidating a private market position. There are several possible ways that a private market position can exit a portfolio, including but not limited to management buyout, initial public offering (IPO), SPAC, sale to strategic buyer or sale to financial buyer. 

Internal Rate of Return (“IRR”): IRR is the annualized rate of return generated from the underlying cash flows of an investment. This metric is commonly used in the private markets due to the drawdown structure of most closed-end funds. 

J-Curve: A “J-Curve” refers to the typical pattern of return of closed-end private markets funds over their lifecycle. In the early years of a fund’s life, the internal rate of return (“IRR”) of a fund is typically negative due to the relatively small amount of invested capital as compared to the management fees that have been paid. The return, if graphed over time, resembles a “J,” as negative early performance turns increasingly positive over time as underlying investments within the portfolio begin to appreciate and generate a return. 

Limited Partner (“LP”) vs. General Partner (“GP”): A Limited Partner (LP) is an entity that invests into a private fund, such as an institution or high-net worth investor. The General Partner (GP) is the fund manager and is responsible for managing the investments within the portfolio on behalf of LPs.

Net Asset Value (“NAV”): The sum of all assets minus any liabilities within the fund. NAV per share is then the NAV divided by the number of shares outstanding.

Preferred Return/Hurdle Rate: The preferred return, also commonly referred to as the “hurdle rate,” is an annual return that limited partners are entitled to receive prior to the general partner receiving carried interest. In practice, it is a way to ensure limited partners make a profit before the GP earns their carried interest.

Public Market Equivalent (“PME”): A Public Market Equivalent (PME) is a relevant public market benchmark whereby the IRR, or Internal Rate of Return, of a private market investment can be compared, assuming similar investment timeframes. PMEs are helpful to judge the opportunity cost of a private market investment relative to the equivalent strategy in the public markets. 

Secondary: A secondary is an investment that purchases existing stakes in private funds on the secondary market. (The secondary market is where previously issued financial products are bought and sold). Due to the illiquidity of the market, these may be purchased at a discount, and the portfolio of companies purchased is often more mature and closer to exit than in a traditional primary investment. 

Total Value to Paid in Capital (“TVPI”): TVPI is the total value of an investment as a proportion of the capital invested. Total value is calculated by adding the current value of unrealized investments and any previous distributions from the fund. This multiple is the total value to paid-in capital (TVPI). 

Unfunded Capital/Dry Powder: Unfunded capital, or dry powder, is the amount of capital yet to be called by the GP from committed capital.


The views expressed are those of the author at the time created. These views are subject to change at any time based on market and other conditions, and Hamilton Lane, disclaims any responsibility to update such views. No forecasts can be guaranteed. These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any Hamilton Lane portfolio. This Hamilton Lane blog is not intended to provide investment advice. This blog should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by Hamilton Lane, or any third-party. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your legal or tax professional regarding your specific situation.

This presentation has been prepared solely for informational purposes and contains confidential and proprietary information, the disclosure of which could be harmful to Hamilton Lane. Accordingly, the recipients of this presentation are requested to maintain the confidentiality of the information contained herein. This presentation may not be copied or distributed, in whole or in part, without the prior written consent of Hamilton Lane.

The information contained in this presentation may include forward-looking statements regarding returns, performance, opinions, the fund presented or its portfolio companies, or other events contained herein. Forward-looking statements include a number of risks, uncertainties and other factors beyond our control, or the control of the fund or the portfolio companies, which may result in material differences in actual results, performance or other expectations. The opinions, estimates and analyses reflect our current judgment, which may change in the future. 

All opinions, estimates and forecasts of future performance or other events contained herein are based on information available to Hamilton Lane as of the date of this presentation and are subject to change. Past performance of the investments described herein is not indicative of future results. In addition, nothing contained herein shall be deemed to be a prediction of future performance. The information included in this presentation has not been reviewed or audited by independent public accountants. Certain information included herein has been obtained from sources that Hamilton Lane believes to be reliable, but the accuracy of such information cannot be guaranteed. 

This presentation is not an offer to sell, or a solicitation of any offer to buy, any security or to enter into any agreement with Hamilton Lane or any of its affiliates. Any such offering will be made only at your request. We do not intend that any public offering will be made by us at any time with respect to any potential transaction discussed in this presentation. Any offering or potential transaction will be made pursuant to separate documentation negotiated between us, which will supersede entirely the information contained herein. 

Certain of the performance results included herein do not reflect the deduction of any applicable advisory or management fees, since it is not possible to allocate such fees accurately in a vintage year presentation or in a composite measured at different points in time. A client’s rate of return will be reduced by any applicable advisory or management fees, carried interest and any expenses incurred. Hamilton Lane’s fees are described in Part 2 of our Form ADV, a copy of which is available upon request. 

The following hypothetical example illustrates the effect of fees on earned returns for both separate accounts and fund-of-funds investment vehicles. The example is solely for illustration purposes and is not intended as a guarantee or prediction of the actual returns that would be earned by similar investment vehicles having comparable features. The example is as follows: The hypothetical separate account or fund-of-funds consisted of $100 million in commitments with a fee structure of 1.0% on committed capital during the first four years of the term of the investment and then declining by 10% per year thereafter for the 12-year life of the account. The commitments were made during the first three years in relatively equal increments and the assumption of returns was based on cash flow assumptions derived from a historical database of actual private equity cash flows. Hamilton Lane modeled the impact of fees on four different return streams over a 12-year time period. In these examples, the effect of the fees reduced returns by approximately 2%. This does not include performance fees, since the performance of the account would determine the effect such fees would have on returns. Expenses also vary based on the particular investment vehicle and, therefore, were not included in this hypothetical example. Both performance fees and expenses would further decrease the return. 

Hamilton Lane (Germany) GmbH is a wholly-owned subsidiary of Hamilton Lane Advisors, L.L.C. Hamilton Lane (Germany) GmbH is authorised and regulated by the Federal Financial Supervisory Authority (BaFin). In the European Economic Area this communication is directed solely at persons who would be classified as professional investors within the meaning of Directive 2011/61/EU (AIFMD). Its contents are not directed at, may not be suitable for and should not be relied upon by retail clients. 

Hamilton Lane (UK) Limited is a wholly-owned subsidiary of Hamilton Lane Advisors, L.L.C. Hamilton Lane (UK) Limited is authorised and regulated by the Financial Conduct Authority (FCA). In the United Kingdom this communication is directed solely at persons who would be classified as a professional client or eligible counterparty under the FCA Handbook of Rules and Guidance. Its contents are not directed at, may not be suitable for and should not be relied upon by retail clients. 

Hamilton Lane Advisors, L.L.C. is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 in respect of the financial services by operation of ASIC Class Order 03/1100: U.S. SEC regulated financial service providers. Hamilton Lane Advisors, L.L.C. is regulated by the SEC under U.S. laws, which differ from Australian laws. 

Any tables, graphs or charts relating to past performance included in this presentation are intended only to illustrate the performance of the indices, composites, specific accounts or funds referred to for the historical periods shown. Such tables, graphs and charts are not intended to predict future performance and should not be used as the basis for an investment decision. 

The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice, or investment recommendations. You should consult your accounting, legal, tax or other advisors about the matters discussed herein. 

The calculations contained in this document are made by Hamilton Lane based on information provided by the general partner (e.g. cash flows and valuations), and have not been prepared, reviewed or approved by the general partners. 

As of June 30, 2022

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