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GLOSSARY

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Development Property
A property investment involving substantial new construction leading to the creation of a physical asset.

Distressed Debt
Purchase of senior or junior debt instruments of a property, property portfolio or a company, or trade credits of a company, when the borrower is in financial difficulty.

Distribution
Cash or the value of stock disbursed to the limited partners of a private equity fund.

Dollar-weighted Returns
Private equity fund managers have a fixed investment commitment where inflows and outflows are at their sole discretion; timing of cash flows should be factored into the returns, since they are under the manager’s control, using a discounted cash flow method such as IRR. Theoretically, time-weighted and dollar-weighted returns should be the same. This is true only when you calculate a periodic return every time there is a cash flow in or out of the portfolio; thus the value of the portfolio must be assessed at every cash flow. Frequent asset valuations are possible in public equities where liquid secondary markets post constantly changing prices by the minute. Private equity portfolios are revalued quarterly, and thus cannot be re-priced at every cash inflow or outflow; however, even quarterly valuations are only estimates since a liquidity event is at an unspecific date in the future, and immediate liquidity is most likely not possible. The private equity industry therefore uses an IRR calculation, which is by definition dollar-weighted, as a more exact measure of returns. The AIMR specifies that private equity managers should present cumulative annual Net IRR since inception by vintage year, and that composite returns should be calculated on a pooled basis as if from one investment.

Drawdown Schedule
Plan for the actual transfer of funds from the limited partners’ to the general partners’ control -- with most private equity and real estate funds, capital is called on an as-needed basis.

Due Diligence
Private equity or real estate investment firm’s detailed research of the business or property, the management team, and other factors to insure their accuracy, completeness, and soundness; or the investigation and evaluation of a management team’s characteristics, investment philosophy, and terms and conditions prior to committing capital to a fund.

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