Private Markets and AI Glossary

A

Asset manager/Asset management firm: a financial institution that manages investments on behalf of clients, which may include individuals, institutions, and other investors. This term is often used to describe large firms that manage multiple strategies. Blackrock, Vanguard, UBS, and Fidelity are all asset managers.

• The manager may manage assets through separately managed accounts established for institutional or individual clients. This is the more common use of the term “asset manager.”
• The manager may manage assets through pooled vehicles like private funds (private equity, venture capital, hedge fund, credit funds, real estate, etc.) or investment companies (mutual funds). Funds are often also called “clients” for SEC purposes.
• Managers might do both of the above and/or offer different types of investment opportunities to specific clients to help them reach short- and long-term goals. For example, an asset manager managing a separate account for a high-net-worth client might offer a mix of stocks, bonds, cash, pooled investments like mutual funds, and alternative investments like private equity.

Auction process: A process in which a seller of a target company hires an investment bank to identify a number of potential buyers, who will bid on the asset.

B

BigLaw: One word. A colloquial term used to refer to the largest and most prestigious U.S. law firms, which are usually headquartered in major U.S. cities. Many BigLaw firms have more than 1,000 attorneys, though there are a number of smaller, boutique firms that are considered BigLaw because of their prestige. Generally, BigLaw firms have at least 100 attorneys.

Buy-side: Firms that are buying or investing in assets. Also includes the Ontra legal partners representing the party entering into the NDA to receive information (typically when buying a company).

C

Capital call: A fund manager/general partner makes a formal request to limited partners to contribute a portion of their committed capital to the fund. Capital calls can be used to fund a new investment, further support a project, or cover operational expenses.

Closed-end fund: Investors can invest in the fund during the offering or placement period. Capital is called over the funds’ life. Investors may not redeem their interests, but they may be able to sell to another investor with approval from the fund manager. Funds have a fixed life, after which money is returned to investors. PE and VC funds are typically closed-end. In PE, a typical fund life is around 10 years, although they can be shorter or longer.

Continuation fund: A continuation fund is a new fund created by the same GP of the original fund to continue investing in one or a few assets from the original fund. A continuation fund enables GPs to avoid forced liquidation by creating a new investment vehicle for some or all fund assets under a new agreement. A continuation fund lasting several more years provides GPs with the opportunity to deliver greater value to the LPs that join the new fund.

Corporate Transparency Act (CTA): The CTA, enacted in 2021 to curb illicit finance, required many companies doing business in the U.S. to report information about the individuals who own or control them. Beneficial ownership information (BOI) reporting went into effect in 2024. However, on March 21, 2025, the Financial Crimes Enforcement Network (FinCEN) issued an interim final rule (IFR) removing the requirement for U.S. domestic reporting companies and U.S. persons to report Beneficial Ownership Information (BOI) under the Corporate Transparency Act (CTA).

Credit agreement/credit facility: A financial arrangement between a lender, usually a bank or financial institution, and a borrower, often a business or corporation. The borrower is allowed to access funds up to a predetermined limit over an extended period. It is a flexible, pre-approved loan.

Credit investment firms/direct lenders: Credit firms typically manage pooled vehicles (funds) or separately managed accounts, and invest in debt instruments.

D

De-risk: To make something less risky or less likely to take a financial loss.

Direct lending: Refers to making loans directly from funds or separately managed accounts to target companies (often target companies backed by PE funds).

E

Engagement letter: A written agreement between businesses where one party is engaged by the other to perform certain advisory services. Many fund managers enter into engagements with investment banks for sale, restructuring, or another M&A transaction, during which the IB acts as a financial advisor and provides services.

Entity management: Refers to how businesses manage information and filing requirements for their legal entities. For private fund managers, this includes but is not limited to director & office slates, capitalization information, and structure charts.

F

Financial sponsor: A buyer that is a financial/investment firm.

Fund: A pool of money allocated for a specific investment purpose. Funds are often referred to as “clients” of an investment adviser.

Fund of funds: Pooled vehicles that invest in other pooled vehicles.

Fundless sponsor/Independent sponsor: These firms often have investment strategies similar to PE/VC, but they do not have established funds and will just fundraise on a deal-by-deal basis.

G

General counsel: Plural is “general counsels.” The head in-house lawyer for a company or governmental department. May be abbreviated GC on later reference (plural is GCs).

General partner: The entity that serves as the signatory and technical control entity for a private fund. Sometimes the GP and the investment adviser are the same entity. Sometimes they are not.

H

Hedge funds: Pooled vehicles that invest in a variety of asset classes and use hedging strategies — simultaneously buying and shorting assets. They are often investing in publicly traded securities in the open market. Examples include long-short equity funds, long-short credit funds, etc. Hedge funds, in particular, tend to be open-ended funds, meaning that investors can redeem their interests periodically and are not locked up for the life of the fund.

I

Investment adviser/fund manager: The entity that manages the investment decisions for a private fund, usually a contractual relationship. Sometimes the fund GP and the investment adviser are the same entity. Sometimes they are not.

Investment bank: A financial institution specializing in large and complex financial transactions for corporations, governments, and institutional investors.

Investor relations: Investor relations teams in private asset management manage communications and relationships between a firm and its investors/limited partners. IR’s main objective is to keep investors informed and confident in the firm’s strategy. It supports long-term LP relationships.

J

Joinder: Document type, associated with and typically expands the parties bound by an NDA.

L

Leveraged buyout: A deal where a buyer buys all or a majority of a target company’s equity, using a combination of equity financing and debt financing. A portion of the total purchase price for the target company is funded by debt (leverage) that is collateralized by or secured by the target company’s assets and operations.

Limited partner: An investor in a private fund. Includes pension funds, insurance companies, high- net-worth individuals, sovereign wealth funds, family offices, endowments, foundations, and other institutional accounts.

Limited partnerships: Most private funds are organized as limited partnerships. The limited partners are the investors, and the general partner is the manager.

M

Mergers & acquisitions (M&A): Technically, a merger is a legal team for a deal in which two entities are combined. By contrast, a stock purchase is a purchase of stock for cash. Private equity deals can be legally structured as mergers or stock purchases. When people colloquially use the term “M&A” it is often meant to refer to deals in which the buyer is also an operating company (not a PE firm or financial sponsor).

Minority investment: A deal where the buyer acquires less than 50% of the equity of the target company.

Mutual funds: Funds that are professionally managed and offered to retail investors and registered under the Company Act. Mutual funds can only be traded at the end of a trading day based on net asset value. May be organized as a C-corp that issues shares rather than limited partnership interests.

N

Net asset value (NAV) lending: NAV lending allows private equity managers to take out loans secured against the underlying assets in their portfolios. This can enable fund managers to generate liquidity for themselves and their LPs without pursuing a secondary transaction. NAV loans can increase risk as it exposes a portfolio company to other companies’ potential weaknesses.

Non-disclosure agreements: First step in the PE deal process. NDAs govern the terms on which the target company (or seller) provides confidential information to a potential buyer. The disclosing party is usually the seller or target company. The recipient is usually a buyer. The representatives are the parties the buyer needs to disclose information to in order to evaluate a transaction. Includes internal parties, advisors/diligence providers, debt financing sources, equity financing sources, and portfolio companies.

Non-reliance letter: In private equity, a non-reliance letter states a particular report is for information purposes only, and the information contained in the report can’t be the basis for any future legal claim against the person who provided that report provider by the new recipient. These are usually entered into when a target company provides information to a potential buyer. Non-reliance letters are standard documents that incorporate routine clauses protecting the diligence provider issuing the letter from liability. Most providers will use the same letter in every instance, changing only the names of the involved parties and the description of the underlying transaction.

O

Open-ended: Investors can invest in the fund or redeem their interests in regularly scheduled increments. Money can flow in and out of the fund. Funds can exist indefinitely. Hedge funds are typically open-ended.

P

Portfolio company: A company currently owned in whole or part by a private equity fund or other investor.

Primary (or direct) investment: Whether in the PE context or otherwise, a primary investment is an investment in which the buyer buys interests (fund interests, shares, etc.) directly from the issuer. Examples: Buying shares in an initial public offering, buying an interest in a VC company where the money goes directly to the VC company and they issue you new shares directly, investing in a PE fund during its fundraising stage where the fund issues you new LP interests.

Private equity deal: A private equity fund buys the equity of a target company in a negotiated transaction. Often using leverage. PE funds buy target companies, hold them for a period of years, and sell them for more money to make a return on their investment.

Private equity firms:

• A type of asset management firm that focuses on investments in private equity. Private equity firms typically pool capital from large institutional investors or high-net-worth individuals into funds. Generally, funds are not publicly traded and are offered only to qualified purchasers and accredited investors.
• Typically, we use “private equity” to describe investments in later-stage public or private operating companies that can support leverage. Often these are majority or controlling investments.
• Private equity firms are a type of asset management firm but not all asset management firms are private equity firms.
• Most venture capital firms are technically private equity firms, but the term “private equity firm” is colloquially used to refer to investment in more mature companies.
• Private equity funds are often organized as limited partnerships. Some firms will refer to themselves as general partners because they are the managers of these limited partnerships.

Private funds: Funds that issue interests only to qualified purchasers or a limited number of accredited investors (and not retail investors) are typically not required to register with the SEC as investment companies under the Investment Company Act of 1940. Their advisers/managers may still be required to register under the Investment Advisers Act of 1940. Private equity, hedge funds, credit funds, and venture funds generally use a private fund structure.

Private Fund Adviser Rules (PFAR): On Wednesday, August 23, 2023, the U.S. Securities and Exchange Commission (SEC) voted 3-2 to adopt numerous private fund reforms with regard to restricted activities, preferential treatment, quarterly statements, adviser-led secondaries, and more. On June 5, 2024, a three-judge panel on the U.S. Court of Appeals for the Fifth Circuit unanimously voted to vacate the SEC’s Private Fund Adviser Rules (PFAR). The Fifth Circuit held that the SEC exceeded its statutory authority under Section 221(h), added in 2010 through Dodd-Frank, and Section 206(4), an anti-fraud provision of the Investment Advisers Act of 1940.

Private markets: This is a broad term used to refer to investments in equity and debt or other assets that are not traded on a stock exchange. Asset managers, private equity firms, and VC firms all operate in the private markets space.

Proprietary deal/Proprietary sourcing: A deal that is negotiated directly between a buyer and a seller (and their advisers) without running an auction process.

R

Registered Investment Advisor: An investment advisor that is registered with SEC under the Advisors Act. Most PE and credit firms are registered. Exceptions from registration exist for firms that manage less than $150M of assets or invest primarily in VC companies directly (as opposed to through secondaries), but VC firms often register for more flexibility.

Reliance letter: A letter from one party to another allowing it to rely on the contents of a report

Retail investor: An individual or nonprofessional investor who invests their own money.

S

Secondary investment/Secondaries: Transactions in which a buyer buys interests (fund interests, shares, etc.) from another holder of the interests. Examples: Buying shares of a company from someone who bought them in an IPO, buying an interest in a company from an existing shareholder, buying a PE fund interest from an existing limited partner.

Sell-side: Firms that are selling assets (sellers and investment banks).

Separately managed accounts: SMAs are accounts managed on behalf of one investor so that investor’s money is not pooled with other investors the way it would be in a fund structure. Sometimes organized as “funds of one” depending on a number of factors, including how the investor wants to custody and report holdings.

Side letter: In private equity, a side letter is a supplementary and confidential agreement between a private fund, typically the general partner or fund manager, and a limited partner. The contract outlines terms and rights specific to that LP, which may differ from or add to the standard terms outlined in the fund’s governing documents.

Strategic buyer: A buyer that is an operating company.

T

Target company: A company being sold or purchased.

V

Venture capital firms: A type of investment firm that manages funds that invest in startups or early stage companies. Similar to private equity firms. Typically invest in earlier stage or growth companies and make minority or non-controlling investments, often on a direct basis. Generally, investments come from funds, but some VCs will fundraise on a deal-by-deal basis and create investment vehicles for each deal (see “fundless sponsor”). Venture capital firms often provide mentorship to their portfolio companies as well.

A

Artificial Intelligence (AI): computer systems that simulate human intelligence processes such as perception, learning, reasoning, and decision-making. In 2025, AI powers applications across industries, from personalized healthcare to autonomous vehicles to generative content creation.

B

Big Data: large data sets that can be studied to reveal patterns and trends to support business decisions. It is called “big” data because organizations can now gather massive amounts of complex data using data collection tools and systems. Big data can be collected very quickly and stored in a variety of formats.

C

ChatGPT: conversational AI system based on OpenAI’s GPT architecture. It allows users to interact through natural language to retrieve information, generate content, and complete tasks. The current free version (as of 2025) uses GPT-4, while GPT-4o powers premium experiences and supports multimodal input (text, image, and voice).

Chatbot: software interface that simulates conversation with users through text or voice. Chatbots range from rule-based systems with scripted responses to advanced conversational AIs powered by LLMs capable of complex reasoning and task completion.

Claude: family of AI assistants and large language models developed by Anthropic. Claude is engineered for natural, text-based conversations and automating tasks such as summarization, editing, Q&A, decision-making, and code generation. Claude abides by Anthropic’s Constitutional AI philosophy, an ethical framework that distinguishes it from competing AI models like ChatGPT and Google’s Gemini. The tenets of Constitutional AI prioritize AI safety, guiding Claude to deliver ethical, valuable responses while mitigating harmful behaviors and AI bias.

D

Deep Learning: a function of AI that imitates the human brain by learning from how it structures and processes information to make decisions. Instead of relying on an algorithm that can only perform one specific task, this subset of machine learning can learn from unstructured data without supervision.

G

Generative AI: a type of technology that uses AI to create content, including text, video, code and images. A generative AI system is trained using large amounts of data, so that it can find patterns for generating new content.

Generative models: AI systems trained to generate new data samples similar to their training data. In NLP, they predict the next word or phrase based on context. Other types include models that generate images, music, or code.

Google Gemini: previously known as Bard, Gemini is Google’s expansive language model and a collection of multimodal AI models engineered to process diverse data formats, including audio, imagery, software code, textual content, and video. Google is systematically integrating the Gemini chatbot into its tech ecosystem. For instance, Gemini serves as the default artificial intelligence (AI) assistant on the latest Google Pixel 9 and Pixel 9 Pro smartphones. Within Google Workspace, Gemini is accessible via the Docs side panel to facilitate content creation and editing, and through the Gmail side panel to aid in email drafting, response suggestions, and information retrieval from a user’s inbox.

GPT: stands for generative pre-trained transformer. GPT uses complex algorithms, a set of rules for problem-solving that computers follow, and lots of data to generate original text and other media types.

GPT-4: a large multimodal model (accepting image and text inputs, emitting text outputs) developed by OpenAI. It uses a paradigm where pre-training using both public data and “data licensed from third-party providers” is used to predict the next token. After this step, the model was then fine-tuned with reinforcement learning feedback from humans and AI for human alignment and policy compliance.

Guardrails: restrictions and rules placed on AI systems to make sure that they handle data appropriately and don’t generate unethical content.

H

Hallucinations: an incorrect response from an AI system, or false information in an output that is presented as factual information.

L

Large Language Model (LLM): an AI model that has been trained on large amounts of text so that it can understand language and generate human-like text.

M

Machine learning: a subset of AI that incorporates aspects of computer science, mathematics, and coding. Machine learning focuses on developing algorithms and models that help machines learn from data and predict trends and behaviors, without human assistance.

N

Natural language processing (NLP): a type of AI that enables computers to understand spoken and written human language. NLP enables features like text and speech recognition on devices.

Neural Network: a deep learning technique designed to resemble the human brain’s structure. Neural networks require large data sets to perform calculations and create outputs, which enables features like speech and vision recognition.

P

Parameters:numerical values that define a large language model’s structure and behavior, like clues that help it guess what words come next. Systems like GPT-4 are thought to have hundreds of billions of parameters.

Perplexity: an AI-powered search engine and chatbot that leverages large language models (LLMs) to respond to user inquiries by extracting information from the web. The chatbot model facilitates learning and exploration by delivering clear, concise answers rather than merely providing links. Perplexity AI can provide fast and comprehensive answers to complex questions.

R

Reinforcement learning from human feedback (RLHF): a machine learning approach that combines reinforcement learning techniques, such as rewards and comparisons, with human guidance to train an artificial intelligence agent.

T

Token: a basic unit of text that an LLM uses to understand and generate language. A token may be an entire word or parts of a word.

Training data: the information or examples given to an AI system to enable it to learn, find patterns, and create new content.

Transfer learning: a machine learning system that takes existing, previously learned data and applies it to new tasks and activities.

Transformer model: a neural network architecture useful for understand language that does not have to analyze words one at a time but can look at an entire sentence at once.

Last Updated: August 2025