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Glossary of capital introduction and fundraising terms

67 terms used in capital introduction, private fund fundraising and allocator diligence — defined plainly.

Plain-language definitions of the terms used across capital introduction, private fund fundraising and allocator due diligence. Where a term has a page of its own, it links to it.

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A C D E F G H I J K L M N O P Q R S T V W

Accredited investor: A US investor meeting income, net worth or professional-credential thresholds under Regulation D, permitting participation in most private offerings. The issuer, not an intermediary, verifies status as part of subscription.
Allocator: An institution or individual that allocates capital to external managers — pensions, endowments, foundations, insurers, fund of funds, family offices, and the consultants advising them. Used loosely as a synonym for LP.
Anchor investor: An investor committing early and at size, usually for preferential terms such as a fee discount, co-investment rights, capacity rights or an advisory committee seat. Frequently the single thing that makes a first-time raise possible.
AUM: Assets under management: the total value of assets a manager runs for investors. The crudest measure of scale, and historically the one prime brokerage cap intro teams used to decide who received attention.
Capital call: A notice requiring investors to fund part of their commitment. Also called a drawdown.
Capital introduction: Connecting fund managers and private issuers with prospective investors. The introducer creates access; it does not solicit investments, negotiate terms, or close allocations.
Cap intro: Industry shorthand for capital introduction.
Carried interest: The manager's share of fund profits, typically paid after a preferred return and a catch-up. The principal performance-based economic in most private funds.
Catch-up: A waterfall stage where the manager receives a disproportionate share of profits after the preferred return is paid, until the agreed overall profit split is reached.
Clawback: A provision requiring a manager to return previously received carried interest if later losses mean they were overpaid across the fund's life.
Closed-end fund: A fund with a fixed life and no ongoing redemptions. Standard in private equity, venture and most real estate funds.
Co-investment: Direct investment alongside a fund into a specific deal, usually with reduced or no fees. Frequently the term family offices value most.
Commitment: Capital an investor has legally agreed to provide, whether or not it has been called.
Cornerstone investor: See anchor investor.
Data room: A permissioned repository of diligence materials. See the data room checklist for what belongs in one.
DDQ: Due diligence questionnaire: a standardised question set covering strategy, team, track record, operations, compliance, valuation and terms. ILPA and AIMA publish widely used templates.
Distribution: A payment from a fund to its investors, of realisation proceeds or income.
DPI: Distributions to paid-in capital: cash actually returned divided by capital drawn. The realised multiple, and the performance figure allocators trust most because it does not depend on the manager's own marks.
Dry powder: Committed capital not yet called — the gap between what investors have promised and what has been drawn.
Endowment model: An approach associated with large university endowments, allocating heavily to illiquid alternatives on the basis that a perpetual horizon lets the investor harvest an illiquidity premium.
Evergreen fund: An open-ended structure with periodic subscriptions and limited periodic redemptions, rather than a fixed life. Increasingly common in the wealth channel.
Family office: An entity managing the wealth of one family (single-family) or several (multi-family). Private by design, fast-deciding, and reached almost entirely through introductions.
Feeder fund: A vehicle pooling many smaller investors into a single subscription in a main fund, allowing a manager to accept many small tickets without administering each directly.
Finder: An intermediary who introduces parties without soliciting or negotiating. The status of finders in US securities law remains unsettled; the SEC's 2020 proposed exemption was never adopted.
First close: The point at which a fund begins investing with committed capital, before the raise is complete. The hinge of any raise, because most LPs prefer not to be first.
Fund of funds: A fund investing in other funds rather than directly in assets. Professional selectors, institutional ticket sizes, and often an explicit mandate to find managers early.
Gate: A limit on the proportion of a fund that may be redeemed in a given period. Protects the portfolio in stress, and is long remembered by investors when used.
GIPS: The Global Investment Performance Standards: a voluntary framework for calculating and presenting performance consistently. Compliance removes a category of objection about how numbers were produced.
GP: General partner: the manager of a fund. Runs the strategy, makes investment decisions, and takes the carried interest.
GP commitment: The manager's own capital in the fund. Allocators care about the amount relative to the partners' wealth and strongly prefer cash over a fee waiver.
High-water mark: A provision preventing a manager earning performance fees on gains that merely recover prior losses.
Hurdle rate: See preferred return.
ILPA: The Institutional Limited Partners Association, whose principles, reporting templates and DDQ are widely used reference points in private equity.
IRR: Internal rate of return: a money-weighted return measure. Sensitive to the timing of cash flows, so a single fast early exit can flatter a fund IRR for years.
J-curve: The tendency of a private fund's returns to be negative early — fees and costs precede realisations — before turning positive as investments mature.
Key person provision: A clause suspending the investment period if named individuals cease to devote agreed time to the fund. A core LP protection, and one worth conceding readily as a new manager.
LP: Limited partner: an investor in a fund. Provides capital, has limited liability and no day-to-day control.
LPA: Limited partnership agreement: the constitutional document governing a fund's economics, governance and investor rights.
LPAC: LP advisory committee: a body of investor representatives consulted on conflicts, valuations and certain waivers.
Management company: The operating business that runs the funds — employer of the team and recipient of management fees. Allocators assess whether it can survive to the next fund.
Management fee: A recurring fee, typically a percentage of committed or invested capital, funding the management company's operations.
Minimum viable close: The smallest amount from which a manager can genuinely execute the strategy and cover the cost base. Setting one gives a defensible first close target.
MOIC: Multiple on invested capital: total value divided by capital invested, usually measured gross at deal level.
MFN: Most-favoured-nation: a clause letting an investor elect into more favourable terms granted to another investor via side letter.
NAV: Net asset value: the value of a fund's assets less liabilities.
ODD: Operational due diligence: assessment of the infrastructure around a strategy — service providers, valuation, cash controls, compliance, continuity. Frequently sits in a separate team with an independent veto, and is where most emerging managers actually fail.
Placement agent: An intermediary engaged to raise capital for a specific offering, typically compensated as a percentage of capital committed and usually a registered broker-dealer.
Preferred return: A threshold return investors receive before the manager participates in profits. Also called a hurdle.
Prime broker: A bank providing execution, financing, custody and securities lending to hedge funds. Historically the home of capital introduction, delivered as a value-added service to its larger clients.
PPM: Private placement memorandum: the offering document for a private securities offering, covering strategy, terms, fees, conflicts and risk factors.
Qualified purchaser: A US investor meeting a higher threshold than accredited investor status, generally based on investments owned, permitting participation in funds relying on a broader exclusion from registration.
Quality of earnings: An independent analysis normalising reported earnings — adjusting for owner compensation, related-party items, one-offs and revenue recognition — to establish sustainable profitability.
Recycling: Reinvesting realisation proceeds rather than distributing them, within limits set by the fund documents.
Re-up: An existing investor committing to a manager's next fund. A high re-up rate is among the most credible signals available to new investors.
Reserve ratio: The proportion of a venture fund set aside for follow-on investments. Under-reserving is a common structural error in emerging venture funds.
RVPI: Residual value to paid-in: remaining unrealised value divided by capital drawn. The unrealised half of TVPI, and the part allocators discount.
Seeder: An investor providing anchor capital in exchange for economics — typically a share of fee revenue, sometimes management company equity, usually for a defined term.
Side letter: A bilateral agreement giving a specific investor terms differing from the main fund documents, such as fee discounts, reporting rights or co-investment access.
Soft circle: An indication of intent that has not been legally committed. Useful for momentum; not money until documents are signed.
Sponsor: In real estate, the party originating and executing a transaction and raising the equity for it.
Subscription: The process and documents by which an investor commits to a fund, including eligibility verification and AML checks.
Tail provision: A clause entitling an intermediary to compensation on capital closing after an engagement ends, where the investor was introduced during it. Commonly twelve to twenty-four months, and a frequent source of disputes where mandates overlap.
Third-party marketer: A firm marketing funds to investors for compensation, generally required to be a registered broker-dealer in the US where it solicits.
Transaction-based compensation: Payment contingent on whether and how much capital closes. One of the strongest indicators that a person is acting as a broker under US securities law.
TVPI: Total value to paid-in: DPI plus RVPI. The all-in multiple, read by allocators mainly through its realised component.
Vintage year: The year a fund begins investing. Used to compare funds against peers deploying into the same market conditions.
Waterfall: The order in which distributions are split between investors and the manager, through return of capital, preferred return, catch-up and carry. European waterfalls calculate at fund level, American at deal level.

Frequently asked questions

What does cap intro mean?

Cap intro is shorthand for capital introduction: connecting fund managers or private issuers with prospective investors. The introducer facilitates access while diligence, negotiation and the investment decision stay with the manager and the investor.

What is the difference between DPI, RVPI and TVPI?

DPI is distributions to paid-in capital — cash actually returned. RVPI is residual value to paid-in — unrealised value still held. TVPI is the sum of the two. Allocators trust DPI most because it does not depend on the manager's own valuation marks.

What is the difference between an LP and a GP?

An LP, or limited partner, is an investor in a fund with limited liability and no day-to-day control. A GP, or general partner, is the manager: it runs the strategy, makes investment decisions and receives the carried interest.

What is a waterfall?

The order in which fund distributions are split between investors and the manager — return of capital, preferred return, catch-up, then carried interest. European waterfalls calculate at fund level and American waterfalls at deal level, which materially changes when a manager gets paid.

What is operational due diligence?

An assessment of the infrastructure around a strategy: service providers, valuation policy, cash controls, segregation of duties, compliance and business continuity. It frequently sits in a separate team with an independent veto, and is where most emerging managers actually fail.

SeRuM provides introduction and networking services. We are not a registered broker-dealer, not a placement agent, and not an investment adviser. We do not offer, solicit or sell securities, we do not provide investment, legal, tax or accounting advice, and we do not make recommendations regarding any investment. Nothing on this website constitutes an offer to sell or a solicitation of an offer to buy any security, and no such offer will be made except through definitive offering documents provided by the issuer. All investment decisions, due diligence and negotiations are the sole responsibility of the parties involved. Investing in private funds and private companies involves substantial risk, including illiquidity and total loss of capital. Past performance is not indicative of future results.