Private Equity & Private Markets Glossary

Private Equity is an asset class that supports the development, transformation or transmission of unlisted companies. Carried out over a long-term horizon, these investments combine the provision of capital with strategic support for management teams to drive growth and value creation. Private Equity thus contributes to financing the real economy across different stages of company maturity.

Private assets cover all investments made outside public financial markets. This category notably includes Private Equity, private debt, infrastructure and unlisted real estate. These assets are generally characterised by a long-term investment horizon and more limited liquidity than listed assets.

The core-satellite approach is a portfolio construction method that combines a core made up of diversified, resilient strategies offering good visibility, with satellites invested in more targeted strategies designed to enhance performance potential. This approach aims to balance stability, diversification and long-term value creation.

Private debt consists of financing unlisted companies through debt instruments. This type of financing is frequently sought by mid-sized companies looking for alternatives to traditional financing channels, such as banks or public markets.

Private debt is distinguished by being secured against specific collateral negotiated at the time the loan is granted, thereby protecting investors. In addition, in the event of a company's liquidation, creditors are repaid before equity holders. Private debt carries a lower risk profile than other Private Equity strategies; it typically generates lower returns in exchange for this added security.

Infrastructure investing consists of allocating capital to a set of physical assets and essential services, such as roads, bridges or airports. These are long-term investments characterised by stable and predictable cash flows, operating in a heavily regulated sector with significant barriers to entry. This asset class also delivers meaningful geographic and sector diversification.

Venture Capital is a Private Equity strategy that invests in startups with high growth potential but elevated risk. These companies, often innovative, typically have limited access to traditional financing but significant growth potential.

Growth Capital, or Growth Equity, is a Private Equity strategy targeting high-growth companies, often growing at more than 30% per year. These companies generally have a proven business model and the potential to accelerate, whether or not they are already profitable. They seek financing to support a new growth phase, whether to accelerate commercial development, expand capacity, or fund new projects.

A buyout, or LBO, is a Private Equity strategy consisting of acquiring established companies as part of a change in ownership. These transactions are generally carried out using financial leverage, through a holding company that takes on debt to finance the acquisition.

A leveraged buy-out (LBO) is an acquisition technique based on financial leverage. A holding company takes on debt to finance all or part of the acquisition, then repays this debt using the cash flows generated by the acquired company. This technique is mainly used for established companies with stable and predictable revenues and cash flows.

Turnaround Capital is a Private Equity strategy consisting of investing in companies facing operational or financial difficulties. Investors provide capital and strategic support to drive restructuring, restore profitability and support recovery.

GP Stakes consists of taking minority stakes in the capital of alternative asset management firms.

Senior debt refers to debt obligations, notably those issued by banking institutions, which rank ahead of other creditors in the event of borrower insolvency or liquidation. In other words, senior debt holders are repaid before holders of subordinated debt, often referred to as "junior" debt.

Junior debt constitutes the second tier of debt. It can take the form of mezzanine financing or a high-yield bond, with repayment occurring after that of senior debt.

Mezzanine debt is a hybrid form of financing combining characteristics of both debt and equity. It sits within the company's capital structure between senior debt and equity, also ranking below subordinated debt in the hierarchy of claims.

This type of financing offers investors a higher return than traditional debt, in exchange for increased risk, while retaining repayment priority above shareholders.

Unitranche debt is a hybrid form of financing that combines the characteristics of senior and junior (or mezzanine) debt within a single credit facility. Generally provided by private debt funds or direct lenders, it simplifies the financing structure through a single set of documentation, a single point of contact and a single overall interest rate. It is frequently used in LBO transactions, refinancing or external growth operations.

PIK debt is a form of subordinated financing whose interest is not paid in cash on a regular basis, but capitalised and added to the principal amount of the debt. Typically used in LBO transactions, it allows the borrower to preserve cash during the life of the financing. In exchange for higher risk, it offers a higher return than traditional debt.

Greenfield projects refer to investments in infrastructure assets that are under development or construction, such as solar farms, motorways or airports. These assets generally do not generate revenue before entering operation.

Brownfield projects refer to investments in infrastructure assets that are already built and operating, such as solar farms, motorways or airports. These assets generally generate revenue at the time of investment and may require modernisation, expansion or optimisation work.

Core Infrastructure covers the most mature and lowest-risk infrastructure assets, addressing essential needs such as energy networks, public-private partnership (PPP) infrastructure, or renewable energy assets backed by long-term contracts. They generate stable, predictable revenues, often regulated or guaranteed, supporting regular dividend distributions. This long-term strategy (10 to 25 years) typically targets a return of around 7 to 8%.

Core Plus covers infrastructure assets carrying a higher level of risk than Core, such as airports, telecom towers or data centres. Revenues are less regulated and more exposed to market conditions, while remaining relatively predictable. This strategy combines regular dividend distributions with value creation at exit, typically targeting a return of between 8 and 10%.

Value Add consists of investing in infrastructure assets with potential for value creation through development strategies, buy-and-build acquisitions, or operational improvement. Distributions are generally more limited, with value creation coming mainly from the disposal of the investment. Riskier than Core and Core Plus strategies, it targets a return of 10 to 15%.

Private Equity Infrastructure applies Private Equity principles to infrastructure by investing primarily in companies within the sector rather than in individual projects. This strategy aims to create value through business development, acquisitions and operational improvements, in exchange for a higher level of risk and a return potential generally above 15%.

The General Partner is the operational manager of a private market fund, responsible for raising capital from investors, as well as for identifying, executing and managing investments. Its core mission is to maximise value creation and generate optimal returns for fund investors, by deploying strategic and operational expertise throughout the investment cycle.

The Limited Partner is the investor contributing capital to a private markets fund, without participating in operational decisions related to investment choices. These investors can be institutions such as pension funds, foundations, insurance companies, as well as individual investors. Their main role is to provide the financial resources needed by the fund, while delegating management and decision-making to the General Partners.

An asset management firm is a professional entity mandated to administer and steer an investment fund. On behalf of investors, it handles the entire investment process: sourcing opportunities, allocation decisions, and strategic and operational monitoring of portfolio companies. In exchange for this delegated management, it earns fees (notably a management fee). Its central role is to create value within the portfolio throughout the fund's lifecycle, up to the disposal of assets.

An FPCI is a private assets investment vehicle reserved for professional or qualified investors able to invest at least €100,000. It is managed by an asset management firm authorised by the French Financial Markets Authority (AMF).

An FCPR invests primarily in unlisted companies, in France and abroad, with at least 50% of its assets made up of securities not traded on a market.

An FCPI targets innovative unlisted companies. At least 70% of the fund's assets must be invested in innovative European SMEs.

An evergreen fund in private markets is an investment vehicle with no predefined lifespan. It allows for partial subscriptions and redemptions at regular intervals, subject to conditions, offering investors greater flexibility. In the context of Private Equity, this type of fund aims to build a portfolio progressively, by reinvesting disposal proceeds. It maintains a liquidity pocket to meet redemption requests, while preserving exposure to private assets over the long term.

A feeder fund is an investment fund that allocates at least 85% of its assets to a master fund. This mechanism centralises capital management through the master fund while offering a delegated investment structure suited to end investors.

A fund of funds is an investment vehicle that allocates its capital to a diversified selection of underlying funds. This structure gives investors, through a single commitment, a composite portfolio that facilitates diversification as well as simplified administrative and operational management. Investors thus benefit from broad exposure to various strategies and asset classes, optimising risk distribution within their overall allocation.

Closing is the stage at which investors confirm their financial commitment, allowing the fund to begin investing. There may be several closings during the subscription period, which ends with a final closing.

A capital call consists of requesting investors to pay in a portion of their committed capital to fund investments and cover management fees, on a progressive basis.

Due diligence is an in-depth analysis phase carried out prior to an investment. It aims to assess the financial, legal, tax, operational or ESG aspects of a company, an asset or a fund.

The equalisation premium is a mechanism applied in certain Private Equity funds to ensure fair treatment between investors entering at different dates. It allows later subscribers to offset the economic advantage linked to investments already made and the value potentially created since the first closing.

Distributions represent the financial flows returned to investors in a Private Equity fund during the divestment or asset valuation phase. They correspond to the return of the capital initially committed, plus any realised gains. This mechanism marks the culmination of the investment cycle, reflecting the actual materialisation of the value created by the fund.

A re-up refers to an investor renewing their commitment by subscribing to a new fund launched by an asset management firm with which they have already invested. This mechanism reflects the continuity of the trust-based relationship between the client and the manager, often founded on the quality of past performance.

Investing in private markets, particularly in unlisted companies, is characterised by significant illiquidity. To address this constraint, mechanisms exist that allow already-issued fund interests to be bought and sold, generally at a price below their intrinsic value. These investment vehicles are known as secondary funds, as they operate on positions previously subscribed for on the primary market. Secondary funds are often distinguished by a shorter average investment period. Their main advantage lies in the earlier realisation of distributions to investors, in exchange for generally lower performance compared with primary investments.

An LP-led transaction is a secondary market transaction in which one or more investors (LPs) sell their interests in a closed-end fund before its term. It allows them to exit based on market conditions, without changing the fund's structure, as the interests are transferred to other investors.

A GP-led transaction is a secondary market transaction initiated by the asset management firm (GP), consisting of transferring certain assets still held in the portfolio into a new vehicle. It offers a liquidity solution to existing investors (LPs), who can choose to sell their stake or remain invested. This type of transaction allows the GP to extend the holding period of strategic assets in order to continue creating value.

A continuation fund is a Private Equity vehicle designed to extend the holding period of one or more assets from an existing fund that has reached, or is approaching, the end of its lifecycle. This structure maximises asset value by maintaining active management beyond the originally planned period, while giving existing investors the option to cash out their position or reinvest according to their preferences.

The J-curve illustrates the evolution of a Private Equity fund's net value over its lifecycle. It highlights an initial decline, linked to costs and the time taken to value assets, followed by a value creation phase. This dynamic reflects the operational reality of Private Equity funds: initial losses, due to structuring fees and investments in the development phase, are generally offset by gains realised when underlying assets are sold.

The image of the letter "J" perfectly symbolises this trajectory, with a curve that initially declines before a strong and sustained recovery, a pattern typical of Private Equity fund performance.

Net Asset Value (NAV) refers to the current value of an entity such as a fund, a company or an investment structure. It is generally expressed per unit or per share.

DPI measures the realised performance of a Private Equity fund. It corresponds to the capital actually returned to investors, relative to the capital called. Based solely on cash flows received, it reflects net-of-fees performance.

TVPI is a performance indicator used in Private Equity to measure the total value created by a fund. It corresponds to the sum of distributions already paid to investors plus the residual value of the portfolio, relative to the capital called.

MOIC is an indicator that measures the multiple of invested capital relative to the final realised value. It shows how many times the committed amount has been recovered, including capital and gains.

The Net Multiple is a return indicator that compares the proceeds from the sale of assets with the amount initially invested.

IRR, or Internal Rate of Return, is a performance measure that calculates the average return of a portfolio taking into account incoming and outgoing cash flows as well as their timing.

Track record refers to the historical financial performance of a fund or management team. It allows the consistency of results and the ability to generate value over the long term to be assessed.

The vintage corresponds to the year a private equity fund was established and held its first capital raise. Knowing this reference year makes it possible to assess a fund's performance by comparing it with that of other similar funds sharing the same vintage.