The Acronym buster.

AML – Anti-Money Laundering

• What it is: Anti-Money Laundering. A compliance check to verify the source of funds.

• Why it matters: It feels bureaucratic, but it’s non-negotiable. If you can’t pass AML, you can’t wire the money and will lose your allocation.

AUM – Assets Under Management

• What it is: Assets Under Management. The total value of investments a firm manages.

• Why it matters: It signals a Sponsor’s scale and stability. A Sponsor with $1B AUM likely has better back-office infrastructure than one with $10M.

CAGR – Compound Annual Growth Rate

• What it is: Compound Annual Growth Rate. The mean annual growth rate over time.

• Why it matters: It smooths out the volatility. A “100% total return” sounds great, but over 10 years, that’s only a ~7% CAGR—barely beating the stock market.

DPI – Distributions to Paid-In Capital

• What it is: Distributions to Paid-In Capital. The ratio of cash returned to cash invested.

• Why it matters: This is the truth teller. A Sponsor can claim a high IRR on paper, but if their DPI is 0.1x after 7 years, they haven’t actually returned much cash.

EBITDA – Earnings Before Interest, Taxes, Depreciation & Amortization

• What it is: A measure of operating profitability.

• Why it matters: This is the number your valuation is based on. If the Sponsor is buying at “12x EBITDA” and the market average is “8x,” you are paying a premium.

GP – General Partner

• What it is: The deal Sponsor or Manager.

• Why it matters: They hold the steering wheel. You (the LP) are just a passenger. You need to trust their track record implicitly.

HNWI – High Net Worth Individual

• What it is: An investor with $1M–$30M in liquid assets.

• Why it matters: You are often “accredited” but may not be “qualified” for every institutional deal. Club deals give you access to deals usually reserved for larger players.

IC – Investment Committee

• What it is: The senior group at the Sponsor firm that approves deals.

• Why it matters: The “deal guy” you talk to might love the deal, but if the IC kills it, it’s dead. Always ask, “Has this passed IC?”

IRR – Internal Rate of Return

• What it is: The annualized rate of return on equity.

• Why it matters: It can be manipulated by timing. A fast “flip” deal might have a huge 50% IRR but only make you a small dollar profit. Always check MOIC too.

KYC – Know Your Customer

• What it is: The process of verifying your identity (passport/utility bill).

• Why it matters: It’s the first friction point. Have your documents ready in a PDF folder, or you’ll scramble at the last minute to close.

LBO – Leveraged Buyout

• What it is: Buying a company using mostly borrowed money (debt).

• Why it matters: The debt amplifies returns (good) but also amplifies risk (bad). If interest rates rise, LBOs can get squeezed quickly.

LOI – Letter of Intent

• What it is: A document outlining the basic terms of a deal before the contract.

• Why it matters: It’s the “handshake.” It locks up exclusivity so the Sponsor can spend money on diligence without fear of losing the deal.

LP – Limited Partner

• What it is: The passive investor (you) who provides capital.

• Why it matters: You have limited liability (can’t lose more than you put in) but also limited control (can’t tell the CEO what to do).

LPA – Limited Partnership Agreement

• What it is: The main contract for the fund/SPV.

• Why it matters: Read this. It dictates when you can be sued, when you can vote, and how much the GP gets paid. It supersedes everything the Sponsor “told” you.

LTV – Loan-to-Value Ratio

• What it is: The % of the purchase price funded by debt.

• Why it matters: A higher LTV (e.g., 80%) is riskier. If the asset value drops by 20%, your equity is wiped out.

MFO – Multi-Family Office

• What it is: A firm managing wealth for several unrelated families.

• Why it matters: They have bigger checks and better access than SFOs. If you are smaller, joining an MFO can get you into exclusive clubs.

MOIC – Multiple on Invested Capital

• What it is: Total cash returned divided by cash invested.

• Why it matters: It tells you the raw profit. A 2.0x MOIC means you doubled your money. Unlike IRR, you can’t “game” this number with quick timing.

NDA – Non-Disclosure Agreement

• What it is: A contract to keep secrets.

• Why it matters: You can’t see the “Data Room” without signing one. Breaching it can get you sued.

NOI – Net Operating Income

• What it is: Revenue minus operating expenses (Real Estate).

• Why it matters: It reveals the property’s true cash flow before debt. If debt payments (mortgage) are higher than NOI, the deal is losing cash.

PPM – Private Placement Memorandum

• What it is: The legal disclosure document.

• Why it matters: It lists every single way you could lose money. It protects the Sponsor from lawsuits, but it also warns you about the real risks.

RVPI – Residual Value to Paid-In Capital

• What it is: The value of your remaining “paper” equity vs. cash invested.

• Why it matters: It’s “unrealized” profit. Until it’s sold, it’s just a number on a page.

SFO – Single Family Office

• What it is: A private firm managing the wealth of one ultra-wealthy family ($100M+).

• Why it matters: SFOs are the “Whales” of the club deal world. They often lead deals and negotiate better terms that you can tag along with.

SPA – Share Purchase Agreement

• What it is: The final contract to buy the company shares.

• Why it matters: This is the point of no return. Once signed, the money moves.

SPV – Special Purpose Vehicle

• What it is: A shell company created only to hold this one specific asset.

• Why it matters: It isolates risk. If the deal blows up, creditors can’t come after your house or your other investments.

TVPI – Total Value to Paid-In Capital

• What it is: Realized cash + Unrealized “paper” value.

• Why it matters: It shows the potential total return. But be careful—if TVPI is high but DPI is low, most of your profit is still just “on paper.”

UHNWI – Ultra-High Net Worth Individual

• What it is: An investor with $30M+ in investable assets.

• Why it matters: You are a “Qualified Purchaser.” This opens the door to every hedge fund, PE fund, and private deal without regulatory restrictions.

VDR – Virtual Data Room

• What it is: The secure online folder with all the deal docs.

• Why it matters: This is where the skeletons are buried. Don’t just read the slide deck; dig into the VDR to see the leases, audits, and contracts.