TermDefinition

Allocated Investments

Commitments made to HarbourVest funds that have been allocated to, and can be called by, an underlying General Partner

Beta

A measure of the volatility of a security or portfolio compared to the market as a whole

Bridge Financing

An interim financing option used by private equity funds to delay or aggregate capital calls. A given investment is financed using a bridging loan, typically for a period of six to 12 months, with a capital call required only once the bridging loan is due to be repaid

Buyout

An investment strategy that involves acquiring controlling stakes in mature companies and generating returns by selling them at a profit after operational efficiencies, expansion and/or financial improvements

Called Capital

Total amount of capital called for use by the General Partner

Capital Call or Drawdown

A request made by the General Partner for a portion of the capital committed by a Limited Partner

Carried Interest, Carry or Performance Fee

The share of profits due to a General Partner once the Limited Partner’s commitment to a fund plus a defined hurdle rate is reached

Co-investment (sometimes Direct Co-investment)

A minority investment, made directly into an operating company, alongside a fund or other private equity investor

Commingled Fund

A fund structure that pools investments from multiple investors into a single fund

Commitment Period or Investment Period

The period of time within which a fund can make investments as established in the Limited Partnership Agreement

Committed Capital or Commitment

The capital a Limited Partner has agreed to commit to a fund across its lifespan

Compound Annual Growth Rate (CAGR)

The rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each period of the investment's life span

Contributed Capital or Paid-in Capital

The total amount of capital paid into a fund at a specific point in time

Cost (Current, Realised, Total)

Current: The cost of current underlying companies

Realised: The cost of underlying companies from which the fund has fully or partially exited

Total: The cost of underlying companies, both current and fully or partially exited

Current Value or Residual Value

The fair value of all current/unrealised investments

Discount

An investment company trades at a discount if the share price is lower than the net asset value per share. The discount is shown as the percentage difference between the share price and NAV per share

Distributed or Distributions

The total amount of cash (and/or stock) that has been returned to a fund and/or Limited Partners

Distributed to Paid-In Capital
(“DPI”) or Realisation Multiple

Total distributions to a fund and/or Limited Partners divided by paid-in capital

Dry Powder

Capital that has been raised, but not yet invested

Due Diligence

The process undertaken to confirm the accuracy of all data relating to a fund, company, or product prior to an investment. This can also refer to the investigation of a buyer by a seller

Earnings Before Interest,
Taxes, Depreciation and
Amortisation (“EBITDA”)

A measure of earnings before interest and taxes that exclude non-cash expenses. Valuation methods are commonly based on a comparison of private and public companies’ value as a multiple of EBITDA

Fund-level Borrowing

Exposure to leverage in underlying private equity funds. In the context of HVPE, this refers to the Company’s look-through exposure to borrowings at the HarbourVest fund level

Fund of funds

An investment strategy of holding a portfolio of third-party private equity funds and/or other investments rather than investing directly in companies

Funded Capital

The amount of contributed capital that has been invested by the fund, or capital invested by a fund in a third-party investment

Fund of funds (sometimes referred to as Primaries)

An investment strategy of holding a portfolio of third-party private equity funds and/or other investments rather than investing directly in companies

General Partner ("GP")

The manager of a fund

Gross Assets

All of the assets of the Company accounted for under US GAAP before deducting any liabilities

Growth Capital or Growth Equity

Investment in newly mature companies looking to raise funds, often to expand or restructure operations, enter new markets, or finance an acquisition

Initial Public Offering (“IPO”)

The first offering of stock by a company to the public on a regulated exchange

Internal Rate of Return (“IRR”) (Gross, Net, Realised Gross)

A measure of the absolute annual rate of return of an investment that takes both the timing and magnitude of cash flows into account, calculated using contributed capital, distributions, and the value of unrealised investments

Gross: Without fees and carried interest taken into account

Net: With fees and carried interest deducted

Realised Gross: The return from underlying holdings from which the fund has already fully or partially exited, without fees and carried interest taken into account

Investment Pipeline

Total commitments to HarbourVest funds, which are to be prospectively called or invested by an underlying General Partner. This is comprised of allocated investments and unallocated investments

J-curve

A term given to the typical shape adopted by the annual returns from a private equity fund during its lifecycle when graphed. Due to the investment process, capital calls and fees precede value creation and potential distributions

Limited Partner

The investors in a Limited Partnership – the typical structure of a private equity fund. Limited Partners are not involved in the day-to-day management of a fund

Limited Partnership Agreement (“LPA”)

The document which constitutes and defines a Limited Partnership, the legal structure typically adopted by private equity funds

Management Fee

The fee paid to a fund, typically a percentage of the Limited Partner’s commitment

Mean

The average value calculated from a set of numbers

Median

The middle value in an ordered sequence of numbers

Mergers and Acquisitions (“M&A”)

The consolidation of companies, for example where the ownership of a company in the underlying portfolio is transferred to, or combined with, another entity

Mezzanine Finance/Debt

An investment strategy that typically includes junior debt and senior equity, often with the option to convert debt into equity in the event of default

Net Asset Value (“NAV”)

The total value of a company’s assets minus the total value of its liabilities

Preferred Return or Hurdle Rate

A minimum annual rate of return, determined in the Limited Partnership Agreement, that a fund must achieve before the General Partner may receive carried interest

Primary Fund or Primaries

A fund where investors make a commitment at inception, usually as a Limited Partner in a new Limited Partnership

Principal Documents

The Company’s legal and organisational documents, including the Articles of Incorporation and the Prospectus

Private Markets

Investments made in non-public companies through privately negotiated transactions

Real Assets

An investment strategy that invests in physical assets that derive value and generate returns from their substance and properties, including infrastructure, agricultural land, oil and gas, and other commodities

Realised Investment or Exit

An underlying holding from which the General Partner has exited

Realised Value or Proceeds

The returns generated from the liquidation or realisation of underlying holdings

Realised Value to Total Cost (“RV/TC”) Multiple

The returns generated from the liquidation or realisation of underlying holdings divided by the cost of all holdings, both remaining and exited

Recapitalisation

A refinancing strategy used by private equity funds, typically involving an increase in the level of borrowing to enable an early cash distribution to investors

Secondary Fund or Secondaries

A fund that purchases pre-existing interests in private equity funds or portfolios of operating companies

Special Situations

An opportunistic investment strategy that looks to take advantage of market dislocations and unique situations to invest in private companies at discounts to their “fair” market value

Total Value

The fund’s total value plus any capital distributions already made

Total Value/Paid-In (“TVPI”) or Total Value/Contributed Multiple

The fund’s total value plus any capital distributions already made divided by the amount of capital already paid into the fund by investors

Total Value/Total Cost
(“TV/TC”) Multiple

The total value divided by the total cost to date

Unallocated Investments

Commitments made to HarbourVest funds that have not been allocated to, and cannot be called by, an underlying General Partner

Unfunded

The portion of investors’ capital commitment that has yet to be “drawn down” or called by a fund manager

Uplift

Increase in value received upon realisation of an investment relative to its carrying value prior to realisation

Valuation Multiple

The value of an asset relative to a key financial metric

Venture (or Venture Capital)

An investment strategy that generates returns by backing start-up and early stage companies that are believed to have long-term growth potential

Vintage Year

Usually the year in which capital is first called by a particular fund, though definitions can vary based on the type of fund or investment

This section is updated frequently and aims to answer some of your most common questions.

1. What is a commitment?

The capital a Limited Partner has agreed to commit to a fund across its lifespan.

2. What is a Primary fund?

A private equity fund that invests directly in privately held companies rather than in other investment vehicles.

3. What is a Secondary fund?

A fund that purchases pre-existing interests in private equity funds or portfolios of operating
companies.

4. What is a Direct co-investment fund?

A minority investment, made directly into an operating company, alongside a fund or other
private equity investor.

5. What are your current Strategic Asset Allocation targets?

Americas 60%, Europe 20%, Asia Pacific 20%.

6. When did your Strategic Asset Allocation targets last change?

In November 2021, the Board approved revisions to the Company’s five-year portfolio construction (Strategic Asset Allocation) targets. Adjustments were made to the geographical targets and included: an increase to Europe from 18% to 20%; an increase to Asia Pacific from 17% to 20%, and removal of the Rest of World allocation (5%). All other targets remain unchanged.