The Ledger
Glossary
Accredited Investor
An individual or entity that meets the SEC income or net-worth thresholds and is therefore eligible to invest in private funds.
Advisory Committee (LPAC)
A committee of investor representatives that consents to conflicts and to the decisions a fund's agreement reserves to it, while taking no part in managing the fund.
AML / KYC
The anti-money-laundering and know-your-customer checks a fund runs to verify each investor's identity and source of funds before accepting capital.
Broken-Deal Expenses
Costs a fund incurs pursuing an investment that is never completed — the legal, advisory, diligence, and travel expenses on a deal that falls through.
Capital Account Statement
An investor's periodic record of contributions, distributions, fees, and current value in the fund.
Capital Call
A fund's request that an investor wire part of their committed capital, drawn down as the fund needs it.
Capital Call Notice
The formal notice for a capital call: the amount due, its share of the commitment, the due date, and wire instructions.
Capital Commitment
The total amount an investor agrees to contribute to a fund over its life, funded over time through capital calls.
Carried Interest
The general partner's share of a fund's profits, paid once investors have had their capital back and any hurdle rate in the LPA has been met.
Clawback (GP Clawback)
A provision requiring the general partner to return carried interest it was paid earlier if, recomputed against the fund's lifetime results, it kept more than the agreed profit split allows. Common in deal-by-deal waterfalls, where carry is paid as investments are realized.
Commitment Period
The window in which a fund can call capital for new investments, running from the initial closing to a date the LPA fixes — commonly a fifth anniversary, extendable by consent and endable early by investor vote or a key person event.
Continuation Fund
A new partnership formed to buy one or more assets from an existing fund run by the same general partner, with investors electing to sell their interest, roll it into the new vehicle, or both; the new vehicle has its own agreement, so terms negotiated for the original fund apply only where they are written into it again.
Crystallization (Carried Interest)
Fixing a general partner's accrued carry at a point in time so that it is locked in, rather than left subject to how the fund performs afterwards.
Custodian
The institution that holds a fund's assets and keeps its own record of them, separate from the fund's books.
Distribution in Kind (In-Specie Distribution)
A distribution paid in securities or other assets rather than cash; the assets are treated as sold at a value the general partner determines, and that figure is what runs through the waterfall.
Distribution Notice
A fund's notice that capital or proceeds are being returned to investors, usually after a realization.
Document Hygiene
The practice of keeping documents retrievable, not just filed.
DPI (Distributions to Paid-In)
Cash actually returned to investors divided by the capital they have paid in — a measure of realized return.
Drawdown
The act of calling committed capital from investors into the fund; the funded portion of a commitment.
Equalization
An interest adjustment that puts investors joining at a later close on equal footing with those who funded at an earlier one.
Evergreen Fund
A fund with no fixed closing date, valued on a recurring schedule and open to continuous subscriptions and redemptions.
Fair Value
The price a fund would receive to sell an asset in an orderly transaction between market participants — for a private holding, an estimate built from a valuation technique rather than observed in a market.
Fairness Opinion
An independent financial adviser's view on whether the price in a transaction is fair to a party, often sought where the same manager sits on both sides.
Final Close
The point at which a fund stops accepting new commitments and fundraising for the vehicle ends.
Fund Administrator
The third-party firm that maintains a fund's books, calculates NAV, and produces investor reporting on the general partner's behalf.
Fund of Funds
A fund that invests in other funds rather than directly in companies or assets, giving its investors diversified exposure through a single commitment.
Fund Operations
The continuous work of keeping a fund functioning.
General Ledger (GL)
The fund-level accounting record of capital calls, distributions, fees, and expenses that the fund's financial statements are built from.
General Partner (GP)
The manager of a fund, responsible for its investments, operations, and reporting to investors.
Hurdle Rate (Preferred Return)
The minimum return a fund must deliver to its LPs before the GP starts earning carried interest, set in the LPA and accrued on a defined basis.
Institutional Memory
Knowledge a fund retains beyond the people who created it.
Investor Questionnaire
The form bundled with a subscription agreement that collects an investor's tax, regulatory, and eligibility information.
Key Person Provision
A negotiated clause naming individuals whose departure or reduced time commitment suspends the fund's ability to call capital until investors approve how the general partner will proceed.
Limited Partner (LP)
An investor in a fund with limited liability and no role in day-to-day management.
Liquidity Sleeve
The cash, undrawn credit facility, and shorter-duration holdings an evergreen fund keeps on hand to fund redemptions without selling its illiquid assets.
Limited Partner Default
An investor's failure to fund a capital call by its due date; fund agreements typically require a default notice first, allow a short negotiated cure period, and only then make remedies available against the investor's interest.
Limited Partnership Agreement (LPA)
The governing contract between a fund's general partner and its limited partners, setting economics, terms, and governance.
Management Fee
The recurring fee a fund charges its investors to cover operating costs, typically an annual percentage of committed or invested capital.
Most Favored Nation (MFN)
A provision governing whether and how an investor receives more favorable side-letter rights granted to another investor. Depending on the drafting, those rights may apply automatically or only after disclosure and election, and may be subject to eligibility thresholds and exclusions.
Operational Debt
The accumulated cost of allowing documentation to fall behind reality.
Operational Due Diligence (ODD)
A prospective investor's review of how a fund actually operates — who does the work, how money moves, where the controls sit — run separately from the investment case.
Private Placement Memorandum (PPM)
The disclosure document describing a fund's strategy, terms, and risks for prospective investors.
Reconciliation
The process of proving that two independently maintained records of the same fund activity — such as a GL and an LP allocation — describe the same underlying reality.
Redemption Gate
A cap, typically a percentage of NAV per quarter, that limits how much an evergreen fund pays out in redemptions at once.
Regulated Partner
In ILPA's model agreement, a limited partner that is a governmental plan, a foreign plan or another regulated entity, expressly excluding Benefit Plan Investors; where the general partner reasonably judges that such a partner's investment may create a legal or fiduciary problem with adverse consequences for the fund or the general partner, a separate set of remedies becomes available to it.
Retrievability
The ability to recover the right information when it's needed.
Schedule K-1
The annual tax form reporting each investor's share of a fund's income, gains, and losses.
Shadow Accounting
An independent, parallel calculation an LP or GP maintains to verify that another party's numbers still describe the same economic reality.
Side Letter
An agreement that modifies a fund's standard terms for a specific investor, often an anchor or institutional LP.
Subscription Agreement
The contract an investor signs to commit capital to a fund, stating the commitment amount and eligibility representations.
Substitute Partner
The buyer of an existing limited partnership interest once the fund admits it as a partner in the seller's place, succeeding to that interest's rights and obligations; in ILPA's model agreement admission follows the general partner's acceptance of the buyer's subscription agreement, and the buyer is then listed in the register.
Suspension Right
A fund's contractual right to halt redemptions entirely under extreme conditions, rather than fulfilling them at a NAV that hasn't caught up to reality.
TVPI (Total Value to Paid-In)
Realized plus unrealized value divided by capital paid in — a measure of total return, on paper and in cash.
Waterfall
The formula that determines how a fund's distributions are split between LPs and the GP, governed by the hurdle rate and carried-interest terms in the LPA.
Wire Instructions
The receiving-bank details an investor uses to fund a capital call; a common source of error when they go stale.