Private Credit Vocabulary

Flashcards for reviewing private credit terms and concepts.

Private credit

A form of lending provided by non-bank institutions through privately negotiated deals, offering higher returns and greater flexibility.

Direct lending

Private loans made directly to mid-sized companies, often sponsored by private equity firms, with custom terms.

Mezzanine debt

A hybrid of debt and equity financing, typically subordinate to senior debt but offering higher returns and possible equity upside.

Distressed debt

Investing in the debt of financially troubled companies, often to influence restructuring or gain control.

Venture debt

Loans provided to startups and growth companies, typically used alongside equity financing from venture capital.

Asset-based lending

Loans secured by a borrower's assets such as receivables, inventory, or property.

Secondaries

Purchases of existing interests in private credit or equity funds, allowing early liquidity or portfolio repositioning.

Co-investment

Direct investment by an LP alongside a GP in a specific deal, typically with lower fees and better alignment.

SPV (Special Purpose Vehicle)

A legal entity created to isolate financial risk and manage specific assets or investment structures.

Limited Partnership Agreement (LPA)

The main governing contract between the fund manager and investors, outlining structure, fees, and terms.

Side letter

An agreement providing special terms to a specific investor, modifying or supplementing the main fund documents.

Fund commitment

An investor’s pledge to allocate a specific amount of capital to a fund, drawn over time.

Drawdown

A capital call by a fund manager, asking investors to transfer committed funds for investments or fees.

Net Asset Value (NAV)

The total value of a fund’s assets minus liabilities, representing the per-share value of a fund.

Structuring

Designing a legal, financial, and tax framework for an investment that meets commercial and regulatory needs.

Covenant

A clause in a loan or bond agreement that restricts certain borrower actions or requires specific financial performance.

Waterfall distribution

The order in which profits are distributed among investors and managers, typically prioritizing return of capital and preferred returns.

Carried interest

A performance fee earned by fund managers, typically a share of profits above a certain return threshold.

Subscription document

The legal form used by investors to commit capital and agree to fund terms.

Fund formation

Setting up a legal and operational structure for a new investment fund, including regulatory filings.

Fund administration

Ongoing operational support for funds, covering NAV calculation, reporting, compliance, and capital calls.

General Partner (GP)

The entity responsible for managing a private fund, making investment decisions, and handling operations.

Limited Partner (LP)

An investor in a private fund who contributes capital but does not manage daily operations.

Consent memo

A formal document summarizing a proposed amendment or corporate action requiring LP or LPAC approval.

Investment restriction check

A review to ensure a proposed investment complies with fund rules, client mandates, and regulatory limits.

Illiquid

An asset that cannot be easily sold or exchanged for cash without a substantial loss in value or time delay.

Pantheon

A global private markets investment firm with ~$65B AUM, offering private equity, private credit, and real asset strategies.

Pantheon clients

Over 650 global institutions and wealth managers rely on Pantheon for long-term private market solutions.

A group of investors, typically representing the larger Limited Partners (LPs) in a private equity or venture capital fund, that advises the General Partner (GP) on certain matters related to the fund's operations and investments

AUM

Asset under management