Commitment
The total amount an investor, the limited partner (LP), agrees to put into a fund over its life. It is not paid at once: the fund manager, the general partner (GP), calls it in instalments as it invests, usually over four to six years.
Glossary
The words on a capital call, a cap table and a loan agreement
Fund reports, shareholder agreements and loan contracts use their own vocabulary. Here is what the terms mean and how the key figures are computed.
Fund investing
Capital call
A notice from the general partner asking investors to pay part of their commitment, also called a drawdown. It states the amount, the due date and what the money is for: investments, management fees or fund expenses. Valued reads the notice and books the call against the fund once you approve it.
Distribution
Money a fund pays back to its investors, from the sale of a portfolio company, from income or from a refinancing. Some distributions are recallable: the fund may call them again, which raises the unfunded commitment.
Paid-in capital
The sum of all capital calls an investor has paid into a fund so far. It is the denominator of DPI, RVPI and TVPI.
Unfunded commitment
The part of a commitment that has not been called yet: commitment minus called capital, plus any recallable distributions. It is the money an investor still has to keep available for the fund.
NAV (net asset value)
What a fund still holds, less its liabilities, as the general partner reports it in the quarterly report. Your own NAV is your share of it, from the capital account statement, and is the fair value of your position. It is an estimate until the assets are sold.
DPI (distributions to paid-in)
Distributions received divided by paid-in capital. A DPI of 0.8x means 80 cents of every euro paid in have come back as cash. It is the realised part of a fund's return.
RVPI (residual value to paid-in)
The current NAV divided by paid-in capital: the part of the return that is still held in the fund and not yet realised.
TVPI (total value to paid-in)
Distributions plus the remaining fair value (your NAV), divided by paid-in capital, which is the same as DPI plus RVPI. A TVPI of 1.6x means the fund has returned or still holds 1.60 for every 1.00 paid in, after fees.
MOIC (multiple on invested capital)
Distributions plus the remaining fair value, divided by the capital invested, usually measured per investment and before fees. It says how many times the money grew, but not how long that took.
Net IRR (internal rate of return)
The annual rate at which the investor's cash flows balance out: calls counted as outflows, distributions as inflows and the current NAV as a final inflow. Net means after management fees and carried interest. Unlike the multiples, it accounts for time.
J-curve
The typical shape of a fund's cumulative net cash flow over time: negative in the first years, while capital is called and fees are paid, then rising as investments are sold and distributions come in.
Vintage
The year a fund made its first investment or first called capital. Funds are compared with others of the same vintage, because they invested in the same market.
Carried interest
The general partner's share of a fund's profits, commonly 20 percent, usually paid only after investors have received their capital back and, in many funds, a preferred return (the hurdle rate).
Start-ups and angel investing
Cap table
The list of a company's shareholders and what each holds: shares by class, options and instruments that convert into shares later. Valued keeps it by financing round, so you see your stake before and after each one.
Fully diluted ownership
Your share of a company counted as if every option, warrant, convertible loan and SAFE had already converted into shares. It is lower than the share of issued capital and closer to what you will own at an exit.
Pre-money and post-money valuation
The value of a company immediately before and immediately after new money comes in. Post-money equals pre-money plus the amount raised, and an investor's share of the round is the amount invested divided by the post-money valuation.
Convertible loan
A loan to a start-up that converts into shares at a later financing round instead of being repaid, usually at a discount to that round's price or at a valuation cap, whichever is better for the lender. Interest often converts with it.
SAFE (simple agreement for future equity)
An agreement in which an investor pays now for shares issued at a later priced round. Unlike a convertible loan it is not debt and carries no interest; it converts at a discount or valuation cap.
Valuation cap
The highest company valuation at which a convertible loan or SAFE converts. If the next round is priced higher, the investor converts at the cap and receives more shares than the round price would give.
Liquidation preference
The right of certain shareholders to be paid first when a company is sold or wound up, commonly one times their investment, before the remaining proceeds are shared among all shareholders.
Real estate
Loan-to-value (LTV)
The outstanding loans on a property divided by its value. A property worth 500,000 with 350,000 of debt has an LTV of 70 percent. Lenders use it to set conditions, and investors use it to see how much of the value is their own equity.
Gross yield
The annual rent before costs divided by the purchase price. It is quick to compute and useful for comparing offers, but it ignores acquisition costs, running costs and vacancy.
Net yield
The annual rent minus the costs a landlord cannot pass on to tenants, divided by the purchase price plus acquisition costs such as transfer tax, notary and agent fees. It is closer to what a property actually earns.
Fixed-rate period
The period for which a mortgage's interest rate is agreed. When it ends, the remaining debt must be refinanced at the rates of that day, which is why Valued reminds you before it does.
Debt service
Interest plus scheduled repayment on a property's loans over a period. Set against the net rent, it shows whether a property carries itself; the ratio of the two is the debt service coverage ratio (DSCR).
Currencies
ECB reference rate
The exchange rates the European Central Bank publishes every working day for the euro against about thirty currencies. Valued converts each amount at the rate of its own value date, so a dollar call paid in 2021 stays at the 2021 rate.
Start with what you have.
A brokerage statement, fund report or contract is enough to begin. Add the rest of your wealth as you go.