| Term | Definition |
|---|---|
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 | 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, | 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 |
ESG | Environmental, Social, and Governance |
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 | 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 | 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 fund where investors make a commitment at inception, usually as a Limited Partner in a new Limited Partnership.
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.
