Capital calls are issued to limited partners when the general partner has identified a new investment and a portion of the limited partner's committed capital is required to pay for the investment.
When the fund’s annual return has exceeded the hurdle rate, general partners are entitled to carried interest, which is a share of the fund’s profits.
A clawback provision may be included in the limited partnership agreement. It gives the limited partners the right to reclaim a portion of the general partner's carried interest in the event that losses from later investments cause the general partner to withhold too much carried interest.
Capital that is committed by limited partners to a private equity fund, but are usually not invested immediately.
Fund size/Original investment capacity
Total capital committed to a fund by investors, i.e. the original size of a fund. For real estate funds, investment capacity also includes the share of debt financing used by a fund.
The general partners are responsible for managing the activities of the private equity fund, including investment and exit activity.
Hurdle rate/Preferred return
A minimum annual return that the limited partners are entitled to before the general partners may begin receiving carried interest. If there is a hurdle, the rate is typically around 8%.
The J-curve describes the typical return profile of the private equity fund over time. The fund tends to experience negative returns for the first years of its life due to capital calls and investment activity, which is usually offset at a later stage when the portfolio matures. The name refers to this initial dip and the later value creation that takes returns beyond the original investment.
Investors in private equity funds are limited partners and do not participate in the active management of the fund. Limited partners are usually institutional investors, such as pension funds, or high net worth individuals.
General partners usually earn a management fee for managing the private equity fund. The size of the management fee is typically between 0.5% and 2% of committed capital.
Total capital paid into a fund by investors as of the end of the review period.
A fund’s year of establishment.