Revision Cards

How to use: Scan these cards immediately before a mock assessment or review session. They are memory prompts — not substitutes for the full knowledge files. If a card reveals a gap, open the linked file and update your Weak Spots Tracker before continuing.

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Group 1 — Core Mechanics

Concept	One-line reminder	Watch out for	Link
Illiquidity premium	Extra return demanded for locking up capital; must be earned, not assumed	It is not guaranteed — bad entry pricing or poor management can eliminate it entirely	illiquidity-premium
J-curve	Early negative returns (fees, unrealised portfolio) followed by recovery and harvest	Subscription lines flatten the trough and lift IRR without improving underlying performance	j-curve
Capital commitment	Total amount an LP pledges; drawn via capital calls over the investment period	Commitment ≠ money transferred; the unfunded portion is a contingent future obligation, not a sunk cost	capital-commitments
Capital call / drawdown	GP’s formal request for LPs to transfer a tranche of committed capital	”Drawdown” also describes the J-curve’s negative phase — two distinct meanings, check context	capital-calls
Unfunded commitment	Committed capital not yet called; callable at any time during the investment period	Multiple simultaneous calls against insufficient liquidity is overcommitment risk — model it explicitly	capital-commitments
Distribution	Return of capital or profits from fund to LPs; recallable or non-recallable	Recallable distributions are not permanent — treat as contingent until the recall window closes	distributions
Recycling provision	Exit proceeds reinvested within the fund rather than distributed; keeps DPI at zero	LPs with distribution obligations lose access to cash for the recycling period	recycling-provisions
Vintage year	The year a fund begins investing; defines entry pricing and exit environment	Never compare IRRs across vintages without context — macro conditions drive most of the difference	vintage-year

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Group 2 — Fund Structures and Economics

Concept	One-line reminder	Watch out for	Link
Limited partnership	Dominant closed-ended fund structure; GP manages, LP invests, LP liability capped at commitment	LP loses limited liability if it participates in management — must remain passive	limited-partnerships
GP (General Partner)	Fund manager; unlimited liability; decision-making authority; earns management fee and carry	GP has fiduciary duties to LPs but also structural conflicts of interest — LPAC oversight is the check	gp-lp-roles
LP (Limited Partner)	Investor; limited liability; passive; commits capital and receives distributions	Any active management role risks reclassification as GP and loss of liability protection	gp-lp-roles
LPAC	Committee of LP representatives; consent rights on conflicts and key GP decisions; not a governing body	Cannot direct investments or override the GP — advisory and protective role only	gp-lp-roles
Side letter	Bilateral GP–LP agreement supplementing the LPA; negotiates MFN, fees, co-invest, or exclusions	GP must disclose existence to LPAC; favourable terms to one LP may disadvantage others	limited-partnerships
Open-ended fund	No fixed term; periodic subscriptions and redemptions at NAV; subject to gates and notice periods	NAV is appraisal-based, not market-clearing; redemptions can be gated or suspended	open-ended-vs-closed-ended-funds
Closed-ended fund	Fixed capital raise, 10-year term (typically), no redemptions; returns via exits and distributions	No liquidity during the term unless LP sells its interest on the secondary market	open-ended-vs-closed-ended-funds
Gate	Limits total redemptions per period in an open-ended fund to prevent a run	Protects remaining investors; can delay redeeming LPs materially — gates may stack across periods	open-ended-vs-closed-ended-funds
Lock-up	Period during which hedge fund investors cannot redeem; typically 1–2 years	Lock-up expiry ≠ immediate redemption — notice periods and gates still apply after lock-up	hedge-funds
Side pocket	Segregated sleeve for illiquid assets in an open-ended fund; redeeming investors excluded	Legitimate protective tool — but can also be used to conceal problem assets; scrutinise the classification	hedge-funds
Co-investment	Direct deal participation alongside a fund; typically zero or reduced fees and carry	Lower cost but concentrated single-deal risk; access depends on LP relationship with GP	co-investments
Fund of funds (FoF)	Invests in other funds; diversification at the cost of two fee layers	Double fees (FoF + underlying) materially reduce net LP return — always compare on a net basis	fund-of-funds
Secondaries	Purchase of existing LP interests (LP-led) or GP restructuring of a fund (GP-led/continuation)	Discount to NAV is not always a bargain — verify whether the NAV itself is reliable	secondaries
Continuation fund	GP transfers assets from a maturing fund into a new vehicle; LPs choose cash-out or roll-over	A form of GP-led secondary; conflict of interest — GP prefers extension, some LPs prefer exit	secondaries
SMA (Separately Managed Account)	Bespoke mandate for a single large LP; customised strategy, reporting, and governance	Requires very large minimum commitment and higher operational overhead for the GP	separate-managed-accounts
Carried interest	GP performance fee; typically 20% of profits above the hurdle rate	Carry is earned on profits above the hurdle — a fund returning only invested capital earns no carry	carried-interest
Preferred return / hurdle rate	Minimum annual return LPs receive before GP earns carry; typically 8% compound	Hard hurdle: carry only on excess returns; soft hurdle: catch-up applies to all profits — very different economics	carried-interest
Catch-up	Allows GP to receive a higher profit share until it reaches its target carry percentage	Catch-up stops when GP’s share reaches the agreed %; a 100% catch-up is faster and more GP-friendly	carried-interest
Waterfall	The sequenced steps for distributing fund profits between LPs and GP	The order matters — return of capital, then preferred return, then catch-up, then split	waterfalls
European waterfall	Whole-fund: all capital returned first, then preferred return, then catch-up, then 80/20 split	GP waits longest for carry; most LP-friendly structure; carry is only earned on whole-fund profit	waterfalls
American waterfall	Deal-by-deal: carry earned on each profitable exit even if other deals lose money	Less LP-friendly; clawback provisions must exist to protect LPs from over-payment of carry	waterfalls
Management fee	Annual fee on committed (investment period) then invested (harvest period) capital; covers GP costs	Fee base transition is negotiated; some GPs define “invested” differently — affects fee level materially	fee-calculations
Fee offset	Portfolio company fees earned by GP that reduce the LP management fee	Not all GPs apply full offsets; the percentage varies — check the LPA, not GP marketing materials	fee-calculations

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Group 3 — NAV and Valuation

Concept	One-line reminder	Watch out for	Link
NAV (Net Asset Value)	Total fund assets minus liabilities; basis for LP capital accounts and all performance metrics	NAV is an estimate for private funds, not a market-clearing price; reflects judgement, not observable value	nav
GAV vs NAV	GAV = assets before fund-level debt; NAV = GAV minus fund-level liabilities	Portfolio company debt is already embedded in each asset’s fair value within GAV; only fund-level debt reduces NAV	nav
Investor-level NAV	LP’s individual capital account: contributions minus distributions plus allocated gains minus fees	Differs from fund-level NAV per unit due to timing, equalisation, and fee arrangements	nav
Estimated NAV vs Final NAV	Estimated = preliminary; Final = audited/confirmed; gap is widest in stressed markets	Redemptions priced at Estimated NAV may be resettled when Final NAV differs — operationally significant	nav
Level 1 inputs	Quoted prices in active markets for identical assets; observable without adjustment	Rare in private funds — applies only to listed equity positions held by a fund	valuation-risk
Level 2 inputs	Observable inputs other than direct quoted prices (e.g. credit spreads, comparable transactions)	Can drop to Level 3 in stressed markets when the reference market becomes inactive	valuation-risk
Level 3 inputs	Unobservable; management’s own models and assumptions; used for virtually all PE holdings	Level 3 ≠ low quality — it means independent verification is structurally harder; can still be rigorous	valuation-risk
Valuation risk	Risk that stated NAV does not reflect realisable value; greatest for Level 3 assets	Smoothed returns and low reported volatility are symptoms, not reassurance	valuation-risk

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Group 4 — Performance Metrics

Concept	One-line reminder	Watch out for	Link
TVPI	(Distributions + Residual NAV) ÷ Paid-In Capital; total value realised and unrealised	TVPI is soft while RVPI is high — unrealised gains may not be realisable at stated values	tvpi
DPI	Distributions ÷ Paid-In Capital; cash actually returned; the only truly “hard” metric	Low DPI in a mature fund (year 8+) is a red flag; high DPI = value delivered, not just stated	dpi
RVPI	Residual NAV ÷ Paid-In Capital; unrealised value remaining; should decline as fund matures	RVPI rising or flat in a mature fund may indicate stale valuations or inability to exit	rvpi
IRR	Annualised return making NPV of all cash flows zero; time-sensitive	Subscription lines inflate IRR without improving performance; always compare with MOIC and PME	irr
Gross IRR vs Net IRR	Gross = before fees and carry; Net = LP return after all deductions; gap typically 3–5%	Never compare one fund’s gross IRR to another’s net — they are not comparable figures	irr
MOIC	Total value ÷ invested capital; time-insensitive multiple	MOIC ignores how long capital was at risk; pair with IRR; 2× in 3 years ≠ 2× in 8 years	moic
PME (Public Market Equivalent)	Compares private fund cash flows to the same flows invested in a public index	PME < 1.0 means the public index outperformed; positive IRR does not guarantee positive PME	public-market-equivalent
High water mark (HWM)	In hedge funds: performance fees only charged on gains above the previous NAV peak	HWM is per share class or series — a new subscriber may have a different HWM to existing investors	hedge-funds

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Group 5 — Capital Activity and Operations

Concept	One-line reminder	Watch out for	Link
Subscription	Formal process of joining a fund: documents, KYC, legal signing, then capital transfer	Capital must not move before KYC is complete — fund is in breach if it does	subscriptions
Subscription line facility	Short-term credit line bridges investments ahead of LP capital calls; LP cash follows later	Inflates IRR but not MOIC; always ask for with-line and without-line IRRs when comparing funds	capital-calls
Recallable distribution	Distribution the GP can demand back within a specified window for reinvestment or expenses	Never model as permanent income until the recall window closes and is confirmed expired	distributions
Equalisation	Ensures late-close LPs are economically equivalent to first-close LPs regardless of join date	Two distinct costs: catch-up contribution (capital share) and equalisation interest (time value)	equalisation
KYC / AML	Identify investor, verify identity, confirm source of funds, identify UBOs; ongoing obligation	AML is not just at onboarding — risk profiles must be monitored and refreshed over time	onboarding-and-kyc
PIK interest	Interest added to loan principal rather than paid as cash; NAV and income rise on paper	High PIK exposure may signal borrower cash stress, not just structural preference — check cash metrics	private-credit

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Group 6 — Risk Concepts

Concept	One-line reminder	Watch out for	Link
Liquidity risk	Risk that capital cannot be accessed or assets sold at fair value when needed	Overcommitment (LP side) and simultaneous redemptions (fund side) are the two key forms	liquidity-risk
Leverage risk	Debt amplifies equity losses — a moderate EV decline can wipe out all equity at high LTV	Distinguish asset-level (LBO), fund-level (NAV facility), and subscription-line leverage — different impacts on LP NAV	leverage-risk
Concentration risk	Over-exposure across any of: asset, manager, sector, geography, vintage, liquidity type	Hidden concentration (same company held across multiple funds) is common and hard to detect without look-through	concentration-risk
Operational risk	Risk from failed processes, systems, counterparties, or human error; independent of investment returns	Manual processes and data fragmentation make alternatives particularly exposed to operational risk	operational-risk
Valuation risk	Stated NAV may not reflect realisable value; most acute for Level 3 assets	GP incentives may delay markdowns; always read TVPI alongside DPI, not TVPI alone	valuation-risk
DSCR	Operating cash flow divided by total debt service; tests whether a leveraged entity can service its debt from operations	Below 1.0x means operations do not cover debt service; DSCR differs from interest coverage (ignores principal) and leverage ratio (stock, not flow)	debt-service-coverage-ratio
NAV facility	Fund-level credit secured against portfolio NAV; used in harvest phase for liquidity, follow-on, or distributions	LP interests are structurally subordinated to the lender; debt-funded distributions inflate DPI without representing actual exits	nav-facilities
Clawback	LP right to recover carry already paid to the GP if total fund performance falls short of what the waterfall entitles	Most relevant in deal-by-deal waterfalls; difficult to enforce once carry is distributed and taxed; escrow arrangements partly mitigate this	clawback
Responsible investment	Integration of ESG factors into investment analysis, ownership, and reporting; covers due diligence screening, portfolio monitoring, LP reporting	”ESG integration” does not mean exclusion; different regulatory regimes (SFDR, UK SDR) impose different disclosure and classification obligations	responsible-investment

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Group 7 — Asset Classes

Concept	One-line reminder	Watch out for	Link
Private equity	Equity investment in private companies; capital appreciation via exits; waterfall and J-curve apply	IRR and MOIC are primary metrics; DPI and vintage are essential context for comparison	private-equity
Private credit	Loans to private companies; income via interest and fees; seniority determines loss severity	PIK loans inflate reported income and NAV without delivering cash — check cash income separately	private-credit
Hedge fund	Open-ended liquid alternatives across diverse strategies; lock-ups, gates, HWM, and series accounting apply	”Hedge fund” covers very different strategies; volatility and Sharpe Ratio are more relevant than IRR	hedge-funds
Real estate	Property funds; NAV from periodic appraisals; open or closed-ended structures	Annual appraisals create stale NAV between dates; INREV and RICS Red Book govern European non-listed RE	real-estate
Infrastructure	Long-duration essential assets; contracted cash flows; PE-like structure but different risk drivers	Regulatory and political risk can materially affect contracted revenues; often higher leverage than PE	infrastructure

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Group 8 — Source Anchors

Concept	One-line reminder	Watch out for	Link
Source anchor	## Source Anchors section in a knowledge file linking to the relevant public standard	Source notes are learning pointers only — always read the underlying documents directly	index
ILPA Templates	Standardised format for capital calls, distributions, quarterly reports, and fee disclosure	Templates = format only; they do not cover governance — that is ILPA Principles	ilpa-templates
ILPA Principles	Governance framework: LP/GP alignment, LPAC rights, fee transparency, fiduciary obligations	A GP can use ILPA-compliant report templates while operating with governance that breaches the Principles	ilpa-principles
IPEV Guidelines	Industry framework for fair value measurement of private capital investments	Principles-based; two GPs can value identically-structured assets differently and both be consistent with IPEV	ipev-valuation-guidelines
IFRS 13	IASB standard defining fair value and the Level 1/2/3 hierarchy for IFRS reporters	ASC 820 is the US GAAP equivalent; which standard applies depends on the fund’s domicile and accounting basis	ifrs-13-fair-value
FATF Recommendations	International AML/CTF standard underpinning KYC obligations in most jurisdictions	FATF sets the international baseline; national implementation varies — the applicable rules depend on jurisdiction	fatf-recommendations
RICS Red Book	Professional standards for RICS-accredited property valuers; defines Market Value and independence requirements	Governs the underlying property appraisal input to real estate fund NAV — not the fund NAV calculation itself	rics-red-book
CRS / FATCA	Two tax transparency regimes: FATCA (US law) and CRS (OECD multilateral standard) require funds to collect investor tax residency data and report to tax authorities	Both impose direct obligations on funds as Financial Institutions — distinct from KYC/AML; collect different data, report to different authorities	crs-fatca
AIFMD Annex IV	EU regulatory reporting filed by authorised AIFMs to their national competent authority; covers portfolio, leverage, liquidity, and risk data	Systemic risk monitoring tool for regulators — not an LP-facing disclosure; data must be consistent with what is reported to LPs	aifmd-annex-iv