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Commitment, drawdown, carry, hurdle rate, clawback — private capital ki poori vocabulary
Published by The Retail Trader · AUG 08, 2026 · AIF, PE & Alternates
Listed market ke bahar ek poora bazaar hai — AIF, private equity, venture capital aur portfolio management. Yahan ka paisa alag tarah se aata hai, alag tarah se fees leta hai, aur alag tarah se bahar nikalta hai. Ye terms NISM ke Series XIX (AIF) aur Series XXI (PMS aur Portfolio Managers) workbooks se hain.
A se C tak ke terms:
• A round — Successive rounds of funding for a Venture company are given successive letters, i.e. the A round will come first, followed by the B round, etc. New Venture Capital investors can be introduced in each round.
• A shares — Different classes of share are customarily created for different funding rounds in a Venture company.
• Advisory Services — The manager shall not provide advisory services to any investor other than the clients of Co-investment Portfolio Manager as specified in the SEBI (Portfolio Managers) Regulations, 2020, for investment in securities of investee.
• AI-only Fund — An AIF or a scheme of an AIF in which each investor other than Manager, Sponsor, employees or directors of AIF or employees or directors of Manager, is an Accredited Investor.
• Alternative Investment Funds — 'Alternative Investment Fund' (AIF) is primarily a privately pooled investment vehicle.
• Anchor investor — A qualified institutional buyer who makes an application for a value of at least ten crore rupees in a public issue on the main board made through the book building process in accordance with these regulations.
• Angel — Someone who invests in Venture companies, typically at a very early stage, but is not a professional Venture Capitalist.
• Angel Funds — Sub-category of Category I AIF that raises funds from accredited investors.
• Angel Investor — An accredited investor, or key management personnel of an angel fund or its manager, who invests in an angel fund.
• Anti Dilution — Provisions commonly found in the funding agreements governing rounds of investment in Venture companies under which the shareholdings of certain shareholders (typically early - stage investors and entrepreneurs) cannot fall below.
• Appointment of Custodian — The Sponsor or Manager of Category IIIs AIF shall appoint a Custodian registered with SEBI for safekeeping of the securities of the fund and keep the custody of the securities and goods received in delivery against physical.
• Asset Management Company (AMC) — The investment manager responsible for portfolio management and fund operations.
• Attribution Analysis — Powerful tool for understanding the sources of portfolio performance.
• Benchmark Return — Return generated by the chosen benchmark, over the reporting period.
• Bonus Issues — A bonus issue of shares is made to the existing shareholders of a company without any consideration from them. The entitlement to the bonus shares depends upon the existing shareholding of the investor.
• Bottom up — The way in which analysis of Private Equity funds must be carried out, by modelling the individual transactions within a fund in order to build up a picture of the whole.
• Buyout — Generic name for a group of transactions in which debt is used to assist the acquisition of a control position in a company.
• Capital Appreciation — Appropriate investment objective for those who want their portfolio value to grow over a period of time and are prepared to take risks.
• Capital asset pricing model (CAPM) — Method to arrive at the market value of the capital of a company based on the market price of its assets.
• Capital Call — A demand by a Private Equity fund for some part of the money which has been committed (i.e. promised) to it by investors.
• Capital commitments — Normal capital expenditure requirement on an on-going basis.
• Capital Invested — Total amount drawndown by the manager, from the investors in the AIF, for the purpose of making investments.
• Capital Preservation — Minimizing or avoiding the chances of erosion in the principal amount of investment.
• Cash outflows for the investors — Capital commitments and the only cash inflow is the Net Distribution.
• Cash settlement — Settlement method where upon expiration or exercise of the derivatives contract, the counterparties to the contract settle their position through exchange of the price differentials and do not deliver the actual (physical).
• Catch - up — Where a hurdle rate applies, a procedure under which all of the gains of a fund can be applied to the Investment Manager once the hurdle rate is achieved until the underlying carry percentage is reached.
• Category I AIF — Is an AIF that invests in start-up or early-stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable and shall include.
• Category III AIF — Pooled investment vehicle, which collects investment capital from investors to invest the funds over a long-term.
• Characterisation of income — Capital Gains vs Business income A determination of whether the securities are held as capital assets or as stock-in-trade is a mixed question of law and fact and would depend on the facts and circumstances of each particular.
• Churn rate — Percentage of customers who discontinue using a product or service over a given period.
• Class rights — Rights (such as a liquidation preference) attaching to a particular class of shares in a company which cannot be varied except with the consent of the holders of that class of share.
• Clawback — An arrangement whereby at the end of a fund's life, the investors may recover from the Manager of the fund any overpayment of carry (i.e.
• Clearing and Settlement — Clearing and settlement are post trading activities that constitute the core part of equity trade life cycle. Clearing activity is all about ascertaining the net obligations of buyers and sellers for a specific time period.
• Clearing corporation — Entity through which settlement of securities takes place for all the trades done on stock exchanges.
• Co- investment scheme — A scheme of a Category I or Category II AIF, which facilitates co- investment to investors of a particular scheme of an AIF, in unlisted securities of an investee company where the scheme of the AIF is making investment or has.
• Commitment — A legally binding promise by an investor to make a certain amount of money available to an Alternative Investment Fund on demand.
• Committed capital — When used by an investor, the total of all current commitments to all funds by that investor.
• Company Analysis — Final step in the top-down approach to Stock Analysis.
• Competitive Advantage — Companies with strong brand value, unique products, or cost leadership tend to outperform.
• Competitive Landscape — The level of competition affects profitability. Analysts use Porter's Five Forces Model, evaluating.
• Constituent Weightings — Index constituents are weighted based on their float-adjusted market capitalization. On the other hand, to find a place in NIFTY 50 the stock's trading frequency should be 100% in the last six months.
• Constituents of IPS Since IPS — Most important document, it needs to be prepared with caution.
• Corporate Liquidation — This is the least preferred and worst case exit option. Liquidations are statutory processes that take a long time to completion and would only provide salvage value if any, to the AIF.
• Corporate Treasuries — Corporate treasuries are increasingly seen as profit centres. Traditionally, the role of corporate treasury has been that of manager of financial risks and provider of liquidity.
• Country risk — Additional dimension in international investing which is associated with the differences in various geographies and the associated political and macroeconomic risk factors.
• Cross-sectional diversification — Holding equities across different industries, sectors, and geographies at a given time.
• Current Income — Investment objective pursued when investor wants her portfolio to generate income at regular interval by way of dividend, interest, rental income rather than appreciation in the value of the portfolio.
• Custodian & Valuer — Safeguards assets and ensures fair valuation. These structures ensure transparency, governance, and investor protection while enabling efficient capital deployment into financial markets and infrastructure development.
D se F tak ke terms:
• Data and Implementation Complexity — Requires robust data analysis, making execution difficult for retail investors.
• Deal sourcing — Dedicated professionals help a PE Fund to streamline the process and building lists of potential start-ups from research, emails, calls, and other sources. The start-ups so approached provide investor pitch to the PE Fund.
• Debt Funds — Invest in corporate bonds, mezzanine debt, and distressed loans.
• Dedicated-Short Directional Strategy — Category of Directional Strategy, in which the investment manager exclusively takes buy positions only.
• Demand and Supply Conditions — High demand and limited supply create pricing power, increasing profitability for industry players.
• Depositories — Depositories are institutions that hold securities (shares, debentures, bonds, government securities, mutual fund units) of investors in electronic form.
• Depository Participant — Agent of the depository providing depository services to the investors.
• Directional Strategy — Opposite of Market-Neutral Strategy, as the investment manager will not aim at having a Portfolio Beta of zero or close to zero.
• Distressed Securities — Securities of the companies that are in financial distress or near bankruptcy.
• Distributed to paid in (DPI) — A multiple commonly used in analysing Private Equity funds. It represents the ratio of money distributed (i.e. paid out) by the fund to money paid in (i.e. drawn down).
• Distribution — The process of a fund paying money to an investor after exiting an investment.
• Distributor of an AIF — Vital link between potential investors and the investment managers of an AIF.
• Distributor services — Key differentiators to establish the distributor's activity leadership, build a clientele and relationship with Category III AIFs.
• Dividend Collection Costs — Allowable expense, if Dividend Income is recognized as 'Profits and Gains from Business or Profession'.
• Downstream Investment — Investment made by an Indian Investment Vehicle in a domestic company, where more than 51 percent investors in the Indian Investment Vehicle are foreign investors.
• Draft offer document — Offer document filed with SEBI for specifying changes, if any, in it, before it is filed with the Registrar of companies (ROCs) in case of a public issue and before it is filed with the Stock Exchanges in case of a Rights Issue.
• Drag Along — A form of exit protection whereby shareholder A can force shareholder B to sell B's shares alongside A's should A receive an offer from a third party.
• Drawn down capital — When used by an investor, the total amount of committed capital which has actually been requested by the funds.
• Dry Powder — Amount of committed but unallocated capital with VC and PE firms for deployment when attractive investment opportunity arises, or to ease financial distress.
• Due diligence — The process of performing background checks and rigorous financial analysis on a fund (for an investor) or on a potential investee company (for a manager of the fund).
• Early stage investing — Different skill set as compared to steering later stage or established companies.
• Early-stage capital — Capital provided to set up initial operation and basic production, as the company can get customers for their offering to help generate revenue.
• EIC framework — Commonly used approach to understanding fundamental factors impacting the earnings of a company, scanning both micro and macro data and information.
• Emergency Cash — The emergency cash reserve is usually measured as two to three months' spending, but it could be more if the individual's source of income is at risk or volatile.
• Employment and Wage Growth — High employment and rising wages increase consumer spending, benefiting businesses.
• Enhanced Risk-Adjusted Returns — Factor strategies aim to outperform market benchmarks with better risk control.
• Enterprise Value — Sum of "Market value of Equity and Market Value of Debt LESS the value of excess Cash in the business".
• Enterprise value (EV) — Debt-free/cash free value of the operating business.
• Equity as a Residual Claim — Equity holders have a residual claim on a company's assets and earnings. This means they are the last to be paid in the event of liquidation, after all debts and liabilities are settled.
• Equity investments — Most common form of investments by Category III AIFs, in large-cap stocks, mid-cap stocks or small-cap stocks or in listed stocks or unlisted stocks.
• EV/EBITDA Ratio Enterprise Value (EV) — Important component of many ratios analysts use to compare companies, such as the EV/EBITDA multiple.
• Even if an Indian company — Subsidiary of a foreign company or it is controlled from a place located outside India, the Indian company is considered as resident in India.
• Exception to this regulation — The transaction is: an off-market inter-se transfer between insiders along with timely disclosure to the company.
• Exchange rate risk — Volatility of return introduced by acquiring investments denominated in a currency different from that of the investor.
• Exchange Traded Fund — Fund that can invest in either all of the securities or a representative sample of securities included in the index.
• Exchange Traded Markets — The other option of trading in securities is through the stock exchange route, where trading and settlement is done through the stock exchange.
• Exit Load — Additional fees charged to investors, on redemptions made after completion of the lock-in period but before the expiration of stated fund tenure.
• Exit protection — Contractual provisions within a shareholders' agreement which seek to protect the right of the Private Equity investor to force an exit, usually after the expiry of a set period.
• Factor Funds — Definition Factor funds, also known as smart beta funds, follow specific quantitative factors or characteristics such as value, momentum, volatility etc. to construct portfolios.
• Financial risk — Financial risk relates to the means of financing the assets with either debt or equity. When a firm borrows, it is required to make fixed payments to be paid ahead of payments to stockholders.
• Foreign investors in the AIF — Resident of the country: whose securities market regulator is a signatory to the International Organization of Securities Commission's (IOSCO) Multilateral Memorandum of Understanding (Appendix A Signatory), or 64 Vide SEBI.
• Foreign Portfolio investor (FPI) — Entity established or incorporated outside India that proposes to make investments in India.
• Foreign Portfolio Investors (FPIs) — A Foreign Portfolio investor (FPI) is an entity established or incorporated outside India that proposes to make investments in India.
• Fund — Pooled investment vehicle, which invests in other AIFs in the industry, with the purpose of achieving greater diversification across different investment strategies.
• Fund ABC — Open-ended Category III AIFs launched on January 01.
• Fund cycle — The natural rhythm of a fund's operations. Very broadly, this will usually take the form of an investment period, followed by a development period and a harvesting period, when exits are effected.
• Fund management — Most critical function in an Asset Management Company.
• Fund Manager — Responsible for investment decisions, risk assessment, and portfolio management.
• Fund monitoring — Integral part of ensuring compliance with fund objectives, the terms of the contribution agreement and for gathering information.
• Fund Structure — General Information Provide a brief overview of the AIF Sponsor and the Investment Manager, the Fund Structure, including information on the founding, subsequent history and information on any predecessor firm and/ or parent.
• Fundamental Analysis — Process of determining intrinsic value for the stock based on the fundamentals that drive its intrinsic value.
• Fundraising — The process of finding investors (LPs) to commit to a new fund.
• Further Public Offer (FPO) — When an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, it is called a further public offer (FPO).
G se M tak ke terms:
• Geopolitical risk — Risk associated with wars, terrorist acts, and tensions between states that affect the normal and peaceful course of international relations.
• Global Economic Trends — International trade policies, geopolitical risks, and currency exchange rates also impact stock markets.
• Government Policies and Regulations — Fiscal policies (tax cuts, government spending) and monetary policies (rate changes, liquidity measures) shape the business environment.
• Grievance Redressal — The Manager shall redress investor grievances promptly but not later than twenty-one calendar days from the date of receipt of the grievance and in such manner as may be specified by the SEBI.
• Gross Domestic Product (GDP) Growth — A growing economy typically leads to higher corporate profits and stock market gains.
• Gross IRR — Gross IRR is calculated with the cash inflows and cash outflows at the fund level, before deducting management fees, incentive fees, fund expenses and taxes paid.
• Growth investing — Common PE strategy, wherein an investor will acquire a minority stake, looking to further grow the company.
• High-Water Mark — Higher of the subscription price of units issued to a particular class of investors, or the highest NAV achieved at the end of any previous financial years.
• Holding Period — Capital gains from debt investments are classified as long-term if the holding period exceeds 24 months.
• Hurdle — Used in its commonly accepted sense of a hurdle return, i.e. the lowest possible return which a particular investor will accept.
• Illiquidity — The inability of the fund to sell its investments reasonably at proper exit valuations within the life cycle of the fund.
• Illusion of Control — Familiarity, access to information, active involvement etc. give rise to the illusion of control over the stock price.
• Income Generation — Earning regular income through dividends, interest, or rental income from assets.
• Indexation Benefit — This allows investors to adjust the purchase price based on inflation, reducing taxable gains.
• Industry Life Cycle — Analysts determine whether an industry is in the introduction, growth, maturity, or decline phase. Growth-phase industries offer the best investment opportunities.
• Inflation Rates — Moderate inflation is good for businesses, but high inflation erodes purchasing power and raises costs.
• Initial due diligence — Due diligence process helps to gain a deeper understanding on how the start-up and its management is executing the plan that was pitched to the investor.
• Initial margin — Percentage of transaction value arrived at based on concept of "Value At Risk" philosophy and MTM margin is the notional loss which an outstanding trade has suffered during a specified period on account of price movements.
• Initial Public Offer (IPO) — An initial public offer of shares or IPO is the first sale of a corporate's common shares to investors at large. The main purpose of an IPO is to raise equity capital for further growth of the business.
• Inspection — SEBI may appoint one or more persons as Inspecting Authority to undertake inspection of the books of account, records and documents relating to an AIF.
• Insurance Companies — Insurance companies' core business is to insure assets. Depending on the type of assets that are insured, there are various insurance companies like life insurance and general insurance etc.
• Interest Income — Taxed as per slab rates without indexation benefits.
• Interest rate risk — Possibility of a loss of return to an investor in a debt instrument due to the reduction in its value.
• Invested capital — The total amount of drawn down capital which has actually been invested in companies.
• Investee company — A company within a Venture Capital fund/ Private Equity fund, i.e.
• Investment Committee — The Investment Manager may constitute an Investment Committee (called by any name) to approve all the investment decisions of the fund.
• Investment Manager — Manages the ReIT's portfolio, including asset acquisitions and operations.
• InvIT Trustee — Acts in the interest of investors and monitors the investment manager.
• IRR — Internal rate of return (so called because it was originally used to calculate the return on different projects within a company).
• Issuer — Any company/corporation making an offer of securities.
• J - curve — The effect of all Private Equity funds, irrespective of final performance, exhibiting strongly negative returns in the early years as money is drawn down into the fund, reversing as distributions begin.
• Later-stage capital — Capital provided in order to scale the business and expand in different markets, geographies, develop new product segments or acquire companies in order to increase their product offerings.
• LBO — Leveraged Buyout. In one sense all Buyouts are LBOs, since they all involve the use of debt.
• Legal agreements — Basis of the contract between the Investors and the Fund.
• Liquid Net Worth — As per Regulation 7A- The liquid net worth requirement shall be a net worth of not less than- (i) twelve crore fifty lakh rupees for Category I merchant banker, and (ii) two crore fifty lakh rupees for Category II merchant.
• Liquidity risk — Uncertainty introduced by the secondary market of an investment.
• Low Volatility Factor — Stocks with lower price fluctuations historically tend to provide better risk-adjusted returns.
• Macroeconomic Factors — Affect all asset classes and include inflation, economic growth, interest rates, and liquidity conditions.
• Maintenance of Records — The Sponsor and/or Manager of the AIF is required to maintain, for a period of 5 years after the winding up of the fund, records such as assets under the scheme/fund, valuation policies and practices, investment strategies.
• Management Buyouts (MBOs) — Common form of Leveraged Buyouts, wherein a group led by people in the current management of a company buy out majority of the shares from existing shareholders and take control of the company.
• Management Quality — Analysts assess the leadership team's track record, vision, and decision- making ability.
• Margining Process Margin — The funds or securities which must be deposited by Clearing Members as collateral before executing a trade.
• Mark-to-Market — Process of valuing the Category III AIF portfolio, based on the fair market value of every security i.e.
• Market Value Added (MVA) — Difference between the current market value of a firm and the original capital contributed by investors.
• Material Changes in PPM — All Category III AIFs shall inform SEBI about any material change from the information provided by the Fund in the Private Placement Memorandum (PPM), at the time of application for registration.
• MBI — Management Buy - In. A type of Buyout transaction where a group of experienced executives buy not their own business but one which is operating in the same sector.
• MBO — Management Buyout. A type of Buyout transaction in which the team of executives managing a business buy it out from the parent company with the support of a Buyout firm.
• Mental Accounting — Information processing bias in which people treat one sum of money differently from another equal-sized sum based on which mental account the money is kept.
• Mezzanine — Convertible unsecured debt which sits between the equity and senior debt layers of a Buyout structure.
• Mezzanine capital — Funds that are provided in a hybrid structure involving the features of both debt and equity capital.
• MOIC — Consistently large MOIC to RVPI ratio should give investors and managers a red flag.
• Momentum — Research suggests that investors extrapolate uptrend (or downtrend) with their positive (or negative) feedback on asset price. If this extrapolative expectation is widespread, it results in herd trading.
• Momentum Factor — Securities with strong past performance tend to continue their upward trend in the short term.
• Money laundering — Serious economic offence as it undermines the integrity of the market participants, distorts economic performance, mis-allocates capital flows, evades taxes and finances criminal and terrorist activities.
• Multi-Factor Investing — Combines multiple factors (e.g., quality + momentum + value) to optimize returns and reduce risk.
N se R tak ke terms:
• Net IRR — Net IRR is calculated with the cash inflows and cash outflows at the investor level. Investors will calculate cash outflows such as capital commitments made for investments, management fees, incentive fees and fund expenses.
• Net return — Return investor actually makes, hence focusing on gross return can be misleading though it can be used to evaluate the performance of investments at a broader level.
• Non-institutional investor — Any investor other than a retail investor and includes family offices, high networth individuals, ultra high networth individuals etc.
• Offer for Sale — Form of share sale where the shares offered in an IPO or FPO are not fresh shares issued by the company, but an offer by existing shareholders to sell shares that have already been allotted.
• Offer for Sale (OFS) — Form of share sale where the shares offered in an IPO or FPO are not fresh shares issued by the company, but an offer by existing shareholders to sell shares that have already been allotted.
• Offshore fund structure — There is no intent to pool capital at the domestic (i.e.
• Offshore Funds and Investors — India follows source-based taxation on capital gains. Accordingly, offshore fund structures are used for offshore investors to invest into India to avoid double taxation on the same income stream.
• Operational risk — Risk of losses occurring because of inadequate systems and control, human error, or management failure.
• Optimal portfolio — One that generates the maximum return for a given risk tolerance of the investor.
• OTC markets — Informal type of markets where trades are negotiated.
• Overcrowding Risks — Excessive investment in popular factors can reduce effectiveness.
• Ownership in the Company — Buying equity in a company means purchasing a share of ownership. Equity investors are partial owners of the business and benefit from its success.
• Parallel Structure — A parallel structure is a fund structure in which offshore investors invests through separate feeder fund(s) in each jurisdiction.
• Pari-passu Rights of Investors — Differential rights may be offered to select investors in the AIF scheme, without affecting the interest of other investors of the scheme, based on the following guiding principles.
• Pass- backs — Indirect incentive provided to potential investors, wherein the distributor gives back a part of the commission earned from the AIF, to the investor.
• Person of Indian Origin (PIO) — A citizen of any country other than Bangladesh or Pakistan, Afghanistan, China, Iran, Bhutan, Sri Lanka and Nepal, if: i) He or she at any time held Indian passport.
• Policies and Procedures — All Category III AIFs shall have detailed policies and procedures, as approved jointly by the Manager and the trustee or trustee company or designated partners or directors of the Fund, so as to ensure that all the decisions.
• Political risk — Volatility of returns caused by the possibility of a major change in the political or economic environment in a country.
• Portfolio — The total holdings of securities and goods belonging to any person.
• Portfolio Value — The aggregate amount of portfolio of investments including cash balance without netting-off leverage undertaken by the Fund.
• Post money — Refers to a valuation of a Venture company including the amount of money contributed by the Venture round in question.
• Post-money valuation — Pre-money valuation of a start-up plus the potential investment to be made in the company.
• Pre money — Refers to a valuation of a Venture company before taking into account the amount of money contributed by the Venture round in question.
• Pre-IPO Placement — Process of allotment of Pre-IPO shares to certain institutional investors, just before the date of the IPO of the investee company.
• Pre-IPO shares — Specific shares, with unique identification numbers, issued to the employees or institutional investors in the company, including Category III AIFs, before such shares are offered to the general public, in an IPO.
• Prediction of weather — Important factor while investing in soft commodities.
• Presence of competition — Good sign for investors as it proves as a validation of a high Total Addressable Market (TAM) for the investor.
• Principal officer — An employee of the portfolio manager who has been designated as such by the portfolio manager and is responsible for (i) the decisions made by the portfolio manager for the management or administration of portfolio of securities.
• Private Equity (PE) Funds — Invest in unlisted companies for long-term capital appreciation.
• Pro-rata Rights of Investors — Investors in an AIF scheme shall have rights, pro-rata to their commitments to the scheme, in each investment to the scheme and in distribution of proceeds of such investment, except as may be specified by SEBI from time to time.
• Project Manager — Responsible for operating and maintaining infrastructure projects.
• Public issue — Securities are issued to the members of the public, and anyone eligible to invest can participate in the issue.
• Pure Debt Fund Exits — Pure debt AIFs take the position of secured / sub-ordinate secured / unsecured creditors in investee companies.
• Qualified Institutions Placement (QIP) — Private placement of shares made by a listed company to certain identified categories of investors known as Qualified Institutional Buyers (QIBs).
• Qualified Institutions Placements (QIPs) — Qualified Institutions Placement (QIP) is a private placement of shares made by a listed company to certain identified categories of investors known as Qualified Institutional Buyers (QIBs).
• Quality Factor — Firms with strong profitability, low debt, and stable earnings growth tend to be more resilient during downturns.
• Quantitative Funds — Invest based on algorithmic and data-driven models.
• Real Estate — Popular avenue for wealth creation, offering tangible assets and the potential for steady returns.
• Real risk free rate — Basic rate of return or interest rate, assuming no inflation and no uncertainty about future cashflows.
• Red herring prospectus — Offer document used in case of a book built public issue.
• Redemptions of units — Encashing or withdrawing the investment made in a mutual fund by selling the units back to the mutual fund.
• Registrar & Transfer Agent (RTA) — Handles investor records, transactions, and fund unit administration.
• Regular Income — Investment objective pursued when investor wants her portfolio to generate income at regular interval by way of dividend, interest, rental income rather than appreciation in the value of the portfolio.
• Regulatory Environment — Some industries, like banking or healthcare, are heavily regulated, impacting their profitability and risk.
• Regulatory risk — Risk associated with unpredictability about the regulatory framework pertaining to investments.
• Reinvestment risk — The investor may not be able to reinvest the intermittent cash flows (coupons) at yields prevalent at the time of making the investment due to either decrease or increase in interest rates prevailing at the time of receipt.
• ReIT Trustee — Ensures regulatory compliance and oversees the investment manager's actions.
• Required rate of return — Minimum rate of return investors expect when making investment decisions.
• Review Policies and Procedures — The Sponsor or Manager shall review policies and procedures of the AIF, along with its implementation, on a regular basis.
• Risk Management — Clearing Corporation, provides settlement guarantee of trades to the counterparties (all buyers and sellers). This exposes the Clearing Corporation to the risk of default by the buyers and sellers.
• Risk measures — Key dimension of performance measurement, and a decisive factor in selecting a portfolio manager.
S se V tak ke terms:
• Secondary Market — The secondary market facilitates trades in the securities that are already- issued in the primary markets, thereby enabling investors to exit from an investment or new investors to buy the already existing securities.
• Secured Debt — Defined as a borrowing that are protected by a specific charge on assets or cash flow or contractual rights of the borrower. Assets can be fixed or current or intangible or all or in any combination.
• Seed capital — Capital provided to help the entrepreneur develop their idea into an early- stage product.
• Seed round — A round of Venture funding which takes place during the seed stage.
• Senior debt — Strictly, debt which takes priority over other layers of debt in the Buyout structure, both as to repayment and on liquidation.
• Short-bias Strategy — Type of Directional Strategy, wherein the investment manager takes both long and short positions in selected stocks or a broad-based market index, but maintains a net short exposure to the broad market.
• Single-Factor Investing — A portfolio is built based on a single dominant factor, such as only investing in low- volatility stocks.
• Size Factor — Smaller companies tend to deliver higher returns than large-cap stocks over the long run.
• Skin in the game — The existence of a significant financial contribution and commitment to the fund by the sponsors and managers.
• Smart Beta Strategies — Index-based investing that deviates from traditional market-cap weighting to emphasize factor exposure.
• Soft dollar arrangements — One where investment managers pay a higher commission to the brokerage firm in lieu of enjoying additional services like access to their research reports, hardware, software or even non-research-related services, etc.
• Sovereign Wealth Funds (SWF) — In recent times, due to large trade surpluses generated by oil trade and global commerce, Sovereign Wealth Funds were started by several countries such as members of the OPEC (notably Kuwait, Saudi Arabia, Qatar, UAE), Norway.
• Special Situation Fund — A Category I AIF that invests in special situation assets in accordance with its investment objectives and may act as a resolution applicant under the Insolvency and Bankruptcy Code (IBC).
• Sponsor — The entity that establishes the mutual fund and contributes initial capital.
• Sponsor commitment — Financial investment required from the sponsor or the manager of the AIF.
• Strategic Sale (M&A Exit) — This option is similar to the secondary sale option except that in this case, the buyer is a corporate buyer either in the same industry (as a competitor) as that of the portfolio company, or a larger company looking for an entry.
• Style Factors — Influence individual securities and include well-known factors like Value, Momentum, Size, Quality, and Low Volatility.
• Sub-Ordinate Debt — All borrowings that rank less than secured debt with first charge are called sub- ordinate debt.
• Systematic and Rule-Based Approach — Removes emotional biases and promotes disciplined investing.
• Tag Along — A form of exit protection, whereby shareholder A can force shareholder B to sell A's shares alongside B's should B receive an offer from a third party.
• Tax Efficiency — Investing in tax-saving instruments to optimize post-tax returns.
• Tax Rate — LTCG on debt investments is taxed at 12.5% under Section 112 of the Income Tax Act.
• Tax Reasons — The primary advantage of Parallel Structures is the beneficial tax treatment received by investors in offshore jurisdictions, who invest through the Offshore Funds.
• Tax Reports in PMS — Portfolio managers must provide detailed tax reports summarizing capital gains, interest income, and tax liabilities for efficient tax planning.
• Tax Saving — Sometimes investors do invest in some select investment alternatives, to reduce their tax burden.
• TDS on Interest — Some debt instruments deduct Tax Deducted at Source (TDS) before crediting interest to investors.
• Technical Analysis — Specialized stream in itself and involves study of various trends- upwards, downwards or sideways, so that traders can benefit by trading in accordance with the trend.
• Technological Disruptions — Emerging technologies can change industry dynamics, creating new leaders and disrupting traditional businesses.
• Time - weighted (returns) — A most misleading term as it actually means the exact opposite of what it suggests. Instead of calculating the actual IRR of a series of cash flows over a given period (i.e.
• Time diversification — Staying invested over long periods to balance out market ups and downs, supporting the adage "time in the market beats timing the market." Empirical studies confirm diversification reduces risk due to the lower correlation.
• Time value — Excess price a buyer of an option is ready to pay over and above the intrinsic value of that option.
• Total Exposure to Derivatives Contracts — Total of Notional Exposure for all futures contracts and option contracts: Derivative Contract Type Notional Exposure (INR) NIFTY50 Put Options 85,50,000 NIFTY50 Call Options 49,50,000.
• Trading — A formal contract to buy/sell securities is termed as trading.
• Trading Members/Stock Brokers — Trading members or Stock Brokers are registered members of a Stock Exchange. They facilitate buy and sell transactions of investors on stock exchanges.
• Transaction costs — Time and money costs like research cost, brokerage etc., for buying and selling securities.
• Trust & Trustee Company — Holds the fund's assets in fiduciary capacity and ensures compliance with SEBI regulations.
• Trustee — AIF is structured as a trust, a trustee is appointed to oversee the fund's activities in the best interest of the investors.
• Types of risk — Market and Non-market risk As per the capital market theory, investors should invest their funds in only two types of assets-the risk-free security and risky asset Portfolio 'M'.
• Unlisted stocks — Primary domain of Category I and II AIFs which entail apart from normal equity risks, illiquidity risk for investors.
• Unsecured debt — A borrowing that is not secured by any fixed or floating charge or a lien is an unsecured debt.
• Valuation Metrics — Analysts use tools like Price-to-Earnings (P/E) Ratio, Price-to-Book (P/B) Ratio, and Enterprise Value to EBITDA (EV/EBITDA) to determine if a stock is fairly priced.
• Value Factor — Stocks that are undervalued relative to their fundamentals (e.g., low price-to-earnings or price-to-book ratio) tend to outperform over time.
• Valuer — Independently values real estate assets for fair pricing.
• VaR — The maximum amount of expected loss for a fund, over a given time frame and a pre- defined confidence level.
• Venture Debt — Type of debt financing for early-stage companies; complementary to equity financing for raising capital.
• Vintage year — The year in which a fund, or group of funds, was formed.
• Voluntary delisting — Condition when the issuer company no longer wants to be on the trading platform of the exchange and exits out of the Exchange.
• Voting Rights — Equity investors, particularly those holding common stock, have voting rights, allowing them to participate in corporate decision-making.
Retail trader ko in products mein aksar entry nahi milti, par inki vocabulary samajhna zaroori hai — kyunki yahi log market mein sabse bada size lekar khade hote hain.
Is journal ke terms aur definitions NISM ke apne certification workbooks se liye gaye hain, sirf educational reference ke liye — ye koi official NISM material nahi hai aur na hi koi buy ya sell recommendation. Regulations aur limits SEBI time-time par badalta hai, isliye exam ya compliance ke liye hamesha NISM ka latest workbook hi authority hai.