An individual or entity who meets specific criteria to invest in securities that are not registered with the Securities and Exchange Commission (SEC) or available to the public. These rules help determine an investor’s sophistication and ability to withstand greater risk.

An accredited investor must have:

• Over $200,000 in income (or $300,000 if combined with a spouse or spouse-equivalent) the past two years with the same expected minimum for the current year

• A net worth of over $1 million either alone or with a spouse/spouse-equivalent (excluding the value of a primary residence)

• Any of the following securities licenses: Series 7, 65 or 82

The act of a private equity fund “calling down” previously pledged capital from its limited partners in order to execute an investment.

The average annual growth rate of a business over a specified period.

Earnings before interest, taxes, depreciation, and amortization. EBITDA is a measure of a company’s performance to give a better understanding of free cash flow generation.

The point at which a private equity firm successfuly relinquishes its strategic position. Most commonly, this is through a private sale, a secondary sale to another private equity firm, or an initial public offering (IPO).

The manager of a fund. The GP is given unlimited liability for the debts and obligations of the fund, as well as the right to manage the fund.

A financial metric that is used to evaluate an investment’s profitability. It is commonly used in connection with private offerings to show a return earned by an investor over a particular period of time, calculated on the basis of cash flows to and from investors

The LP provides part of the capital for the fund, but they have limited liability and don’t manage it. Instead, they play a passive role in the fund, leaving the day-to-day operations and decision-making processes up to the expertise of the general partners (GPs) who manage the investments for them.

A ratio of an investment’s proceeds compared to the original amount invested, which can be used to measure the financial success of a project.

The binding contract among the owners that governs how the deal is run—who’s in charge, who puts in money, how profits/losses are split, what fees are charged, what votes are needed, etc.

The minimum rate of return that the limited partners of a private equity fund must receive net of fees before the private equity firm is entitled to receive its incentive fee or carried interest.

A tax form that reports profits and losses for limited partnerships. Many K-1s are delayed past the typical April tax filing date.

A specialized type of IRA that gives account holders greater control over their investment choices with more diversified and unconventional investment strategies. Unlike traditional IRAs, SDIRAs allow investors to choose from a broader range of assets beyond stocks and bonds, including private market alternatives like private real estate, private equity, commodities, and more. SDIRAs maintain specific rules to retain their tax-advantaged status, as governed by the Internal Revenue Service (IRS).

An investor making a commitment to or investing in a fund. This process includes the investor submitting subscription documents to the fund, meeting eligibility requirements, and the fund manager approving the investment into the fund.

The structured method for distributing profits among investors and sponsors after the business generates income or is sold. It defines who gets paid, in what order, and how much.