Definitions written for investors, not for lawyers. Terms link to the guides that cover them in depth.
Accredited investor — A person or entity meeting SEC Rule 501(a) standards, permitting participation in unregistered offerings. Full guide
Anti-dilution provision — A protective term adjusting a preferred holder's conversion ratio if the company later issues shares at a lower price. A "full ratchet" is the most aggressive form.
Capital call — A demand for previously committed but unfunded capital. Failure to fund typically triggers dilution or forfeiture.
Capital account — Your recorded balance in a partnership: contributions plus allocated income, less distributions and losses. Shown in Item L of your K-1.
Carried interest (carry) — The sponsor's share of profits, typically 10–20%. SPV Fees and Carry
Catch-up — A waterfall tier letting the sponsor take a disproportionate share of profits after the hurdle until reaching its target percentage of total profit.
Clawback — A provision requiring the sponsor to return excess carry if later results fall short.
Cost segregation — A study reclassifying building components into shorter depreciation lives to accelerate deductions.
Depletion allowance — A deduction reflecting the exhaustion of a natural resource as it is produced.
DPI (distributions to paid-in) — Cash returned divided by capital invested. Measures realized performance.
Distribution waterfall — The order in which proceeds are allocated between investors and sponsor. Real Estate Syndications
General partner (GP) — The managing party in a partnership, with management authority and, typically, unlimited liability.
Hurdle rate — The return threshold that must be met before the sponsor participates in profits.
Intangible drilling costs (IDC) — Non-salvageable drilling expenses, generally currently deductible. Oil & Gas Working Interests
Knowledgeable employee — A director, executive officer, or investment-participating employee of a private fund, accredited by virtue of that role.
Limited partner (LP) — A passive investor with liability limited to their investment and no management authority.
Liquidation preference — The right of preferred holders to receive proceeds before common holders in a sale or liquidation. Pre-IPO Investing Risks
Look-through — Treating an entity's owners, rather than the entity, as the relevant parties for a qualification test.
Mezzanine debt — Subordinated debt sitting between senior lenders and equity, often with equity participation. Private Credit
Net revenue interest — An oil and gas working interest's share of revenue after royalties are deducted. Lower than the working interest percentage.
PIK (payment in kind) — Interest that accrues to principal instead of paying cash.
Phantom income — Taxable income allocated to you without corresponding cash distribution. Understanding Your K-1
PPM (private placement memorandum) — The disclosure document for a private offering. Not reviewed by the SEC.
Preferred return (pref) — A priority claim on distributions ahead of the sponsor's profit share. Not a guaranteed yield.
Promote — The sponsor's profit share in a real estate syndication; carried interest by another name.
Qualified client — An investor a registered adviser may charge performance fees: $1.4M under management or $2.7M net worth, as of June 29, 2026. Comparison
Qualified purchaser — An investor with $5M in investments ($25M for discretionary entities), permitting a fund to rely on 3(c)(7). Full guide
Regulation D — The safe harbor permitting unregistered private offerings. Rules 506(b) and 506(c) are the most used.
Rule 506(b) — Exemption permitting private offerings without general solicitation, with light verification.
Rule 506(c) — Exemption permitting general solicitation, requiring reasonable steps to verify accredited status. Verification
Section 3(c)(1) — Investment Company Act exemption for funds with up to 100 beneficial owners.
Section 3(c)(7) — Investment Company Act exemption for funds whose investors are all qualified purchasers, with no 100-owner cap.
SPV (special purpose vehicle) — An entity formed to hold a single investment. Full guide
Streaming agreement — An arrangement providing upfront capital in exchange for the right to buy future production at a discount. Gold & Silver
TVPI (total value to paid-in) — Realized plus unrealized value divided by capital invested. Partly an estimate.
UBTI (unrelated business taxable income) — Income that can cause a tax-exempt account such as an IRA to owe tax. Reported in Box 20, Code V.
Working interest — An ownership interest in an oil and gas operation carrying a share of both revenue and costs.