Private Markets Glossary

The Section 13R scheme (previously known as 13CA, renumbered in the 2022 Income Tax Act revision) provides tax exemption on specified income derived from designated investments by an approved fund managed by a Singapore-based fund manager. It applies to funds structured as companies and requires MAS approval, a minimum fund size of S$20 million at the point of application, a local investment spending commitment, and annual reporting to MAS.

The Section 13U scheme (previously 13X, renumbered in the 2022 revision) is the Enhanced Tier fund tax exemption that provides tax exemption on specified income from designated investments for approved funds regardless of their legal form — including companies, trusts, and limited partnerships. It requires a minimum fund size of S$50 million at the point of application, minimum local business spending of S$200,000 per year, and employing at least three investment professionals in Singapore.

Angel Tax refers to the Indian income tax provision under Section 56(2)(viib) of the Income Tax Act, 1961, which taxes share premium received by an unlisted company in excess of its fair market value as “income from other sources.” Historically a significant concern for startups raising angel and seed rounds, the provision was substantially reformed over the years and was abolished in the Union Budget 2024-25 for all classes of investors effective from Assessment Year 2025-26.

Under the Securities and Futures Act (SFA), an accredited investor in Singapore is an individual whose net personal assets exceed S$2 million (with the primary residence value capped at S$1 million), or whose income in the preceding 12 months is not less than S$300,000, or whose net financial assets exceed S$1 million. For corporations, the threshold is net assets exceeding S$10 million. Accredited investors may access fund offerings that are exempt from full prospectus requirements.

A blind pool is a fund structure in which LPs commit capital without knowing the specific investments the GP will make, relying instead on the fund’s stated strategy, sector focus, and the GP’s track record. The vast majority of PE/VC funds operate as blind pools, with investment discretion delegated to the GP within the parameters set by the LPA.

A capital call (also called a drawdown) is a formal demand issued by the GP to LPs requiring them to transfer a portion of their unfunded capital commitment to the fund, typically to finance new investments, pay fees, or cover fund expenses. LPs generally have 10 to 15 business days to fund a capital call after receiving a drawdown notice.

Carried interest is the share of net investment profits paid to the General Partner as performance-based compensation, typically 20% of profits above the hurdle rate. It is the primary economic incentive for fund managers and is usually subject to the fund first returning all contributed capital and a preferred return to LPs.

A clawback provision is a contractual obligation requiring the GP to return previously distributed carried interest to LPs if, at the end of the fund’s life, the GP has received more carry than it is entitled to based on the fund’s overall cumulative performance. It protects LPs in scenarios where early profitable exits are followed by later losses.

A co-investment is a direct investment made by an LP alongside a GP’s fund into a specific portfolio company, typically offered on a no-fee, no-carry basis or at reduced economics. Co-investment opportunities allow LPs to increase exposure to high-conviction deals, reduce blended fee drag, and build direct investment capabilities.

A capital commitment is the total amount of capital an LP pledges to invest in a fund over its life, as specified in the subscription agreement. The full commitment is not paid upfront but is drawn down over time through capital calls during the fund’s investment period, which typically spans three to five years.

DPIIT is a department under India’s Ministry of Commerce and Industry responsible for formulating and implementing policies related to industrial growth, FDI, intellectual property, and the Startup India initiative. DPIIT recognition is a prerequisite for Indian startups to access tax benefits under Section 80-IAC of the Income Tax Act, exemption from Angel Tax, and participation in government procurement programs.

The distribution waterfall is the contractual mechanism in a fund’s Limited Partnership Agreement (LPA) that defines the order and priority in which cash proceeds from investments are distributed between the GP and LPs. A typical waterfall flows through tiers: first returning LP contributed capital, then paying a preferred return (hurdle rate) to LPs, then a GP catch-up, and finally splitting remaining profits between the GP (as carried interest) and the LPs.

DPI is a fund performance metric calculated by dividing cumulative distributions received by LPs by the total capital they have paid into the fund. A DPI of 1.0x means LPs have received back their invested capital; values above 1.0x indicate net realized profit. It is considered the most reliable performance measure because it reflects actual cash returned to investors.

Dry powder refers to the aggregate amount of committed but uncalled capital available to PE/VC funds for future investments. High levels of industry-wide dry powder can indicate competitive deal-making conditions and potential upward pressure on valuations, while fund-level dry powder reflects the GP’s remaining capacity to deploy capital.

A drawdown notice (or capital call notice) is the formal written communication sent by the GP to LPs specifying the amount of capital to be drawn, the purpose of the drawdown (e.g., investment, fees, expenses), and the deadline for remitting funds. Failure to fund a drawdown notice within the specified period can trigger default provisions under the LPA, which may include forfeiture of the LP’s existing interest.

The Economic Development Board of Singapore runs co-investment programmes — most notably through its investment arm, EDBI, and strategic initiatives — that invest alongside private sector GPs in companies establishing or expanding operations in Singapore. These programmes are designed to catalyse investment into strategically important sectors and have made EDB/EDBI a significant institutional LP and co-investor in the Southeast Asian venture and growth equity ecosystem.

An FVCI is a foreign entity registered with SEBI to invest in Indian venture capital undertakings, Category I AIFs, or Category II AIFs. FVCI registration provides benefits such as exemption from certain pricing norms under FEMA (Foreign Exchange Management Act) and the ability to invest at negotiated prices in unlisted Indian companies.

An FPI is a foreign entity registered with a Designated Depository Participant under SEBI’s FPI Regulations to invest in Indian securities markets. FPIs are classified into categories based on their risk profile and are subject to aggregate and individual investment limits in listed Indian companies. Many global institutional LPs access Indian public markets and PIPE transactions through FPI registration.

A Fund of Funds is a pooled investment vehicle that allocates capital to a portfolio of underlying private equity, venture capital, or other alternative investment funds rather than investing directly in companies. FOFs provide diversification across GPs, strategies, vintages, and geographies, and are commonly used by institutional investors and family offices seeking managed access to the PE/VC asset class.

The first close is the initial closing of a fund at which the GP accepts LP commitments and begins investing, typically once a minimum threshold of the target fund size has been reached. The final close is the last date on which the fund accepts new LP commitments, usually occurring 12 to 18 months after the first close, after which the fund is fully closed to new investors. LPs entering at subsequent closes after the first close typically pay equalisation interest to compensate earlier LPs for the time value of their commitments.

GIFT IFSC, located in Gujarat International Finance Tec-City (GIFT City) in Gandhinagar, is India’s first and only International Financial Services Centre, regulated by the International Financial Services Centres Authority (IFSCA). Funds set up in GIFT IFSC benefit from a favourable tax regime (including a ten-year tax holiday), exemptions from GST on financial services, and a regulatory framework designed to be competitive with global offshore jurisdictions such as Singapore and Dublin. It is increasingly used for setting up AIFs, global fund structures, and aircraft leasing.

The General Partner is the entity (typically the fund management firm or its affiliate) responsible for managing a private equity or venture capital fund, making investment decisions, and handling day-to-day operations. The GP bears unlimited liability for the fund’s obligations and earns management fees and carried interest in exchange for managing LP capital.

GP Commitment is the capital that the General Partner (or its principals) commits to the fund alongside LPs, typically ranging from 1% to 5% of total fund size. This “skin in the game” aligns the GP’s economic interests with those of the LPs and is a standard term evaluated by institutional investors during fund due diligence.

The hurdle rate (or preferred return) is the minimum annualised return that LPs must receive on their invested capital before the GP becomes entitled to carried interest. It is commonly set at 8% per annum (compounded) in PE/VC funds and exists to ensure that LPs earn a threshold return before profits are shared with the GP.

An InvIT is a SEBI-regulated pooled investment vehicle that enables investment in completed and revenue-generating infrastructure assets such as roads, power transmission lines, and telecom towers. InvITs can be publicly listed or privately placed, and they are required to distribute a specified percentage of net distributable cash flows to unitholders, making them attractive yield-oriented instruments for institutional LPs.

The Internal Rate of Return is the annualised rate of return that equates the present value of all cash inflows (distributions) with the present value of all cash outflows (capital calls) over a fund’s life. IRR is the industry-standard time-weighted performance metric for PE/VC funds and captures both the magnitude and timing of cash flows, distinguishing it from multiple-based metrics like TVPI and DPI.

The J-Curve describes the typical pattern of returns in a PE/VC fund’s early years, where the fund initially reports negative returns (due to management fees, fund expenses, and unrealized investments carried at or below cost) before turning positive as portfolio companies mature and generate exits. The shape of the return curve over time resembles the letter “J.”

An LFMC holds a Capital Markets Services (CMS) licence from MAS to conduct fund management activities in Singapore. LFMCs are subject to comprehensive regulatory requirements including minimum base capital of S$250,000 (or S$1 million for retail-facing managers), ongoing compliance, risk management, and audit obligations. This licence is required for managers serving retail investors or managing assets above the thresholds applicable to RFMCs.

A Limited Partner is an investor in a private equity or venture capital fund who contributes capital but does not participate in the fund’s management or investment decisions. LPs enjoy limited liability (their exposure is capped at their capital commitment) and include pension funds, sovereign wealth funds, endowments, insurance companies, family offices, and high-net-worth individuals.

The Limited Partner Advisory Committee is a governance body composed of representatives from a fund’s largest or most strategic LPs, formed to advise the GP on matters involving potential conflicts of interest, valuation of portfolio companies, key person events, and fund term extensions. LPAC members act in their capacity as LPs (not as fiduciaries to other LPs) and do not participate in investment decisions.

The Monetary Authority of Singapore is Singapore’s central bank and integrated financial regulator, responsible for licensing and supervising all fund management companies, securities intermediaries, and financial institutions operating in Singapore. MAS administers the Securities and Futures Act (SFA) under which fund managers are licensed or registered.

The management fee is an annual fee paid by the fund to the GP to cover operational costs such as salaries, deal sourcing, and overhead. It is typically charged at 1.5% to 2.0% of committed capital during the investment period and then may step down to a percentage of invested (or net invested) capital during the fund’s harvest period.

India’s National Pension System is a government-sponsored defined-contribution pension scheme managing assets of over INR 13 lakh crore, regulated by PFRDA. NPS funds are managed by empanelled pension fund managers and have been progressively permitted to allocate to alternative investments including SEBI-registered AIFs, making NPS one of the largest potential domestic LP pools for Indian private equity and venture capital.

Net Asset Value is the fair value of a fund’s total assets minus its liabilities at a given point in time, typically reported quarterly by the GP. NAV per unit represents the current value of an LP’s interest in the fund and is used to calculate unrealized performance metrics such as RVPI and TVPI.

PFRDA is the statutory authority established under the PFRDA Act, 2013, to regulate and develop India’s pension sector, including the National Pension System (NPS) and the Atal Pension Yojana. PFRDA sets the investment guidelines under which NPS pension fund managers allocate capital, including to AIFs and other alternative asset classes.

A REIT in India is a SEBI-regulated trust structure that owns and manages income-producing real estate, primarily commercial office and retail properties. Launched in India in 2019, REITs must distribute at least 90% of net distributable cash flows to unitholders and are listed on Indian stock exchanges. They provide institutional and retail investors with liquid access to Grade-A real estate portfolios.

An RFMC is a fund management company registered (rather than licensed) with MAS, permitted to manage assets for up to 30 qualified investors with total AUM not exceeding S$250 million. RFMCs benefit from a lighter regulatory framework compared to LFMCs, making this an accessible entry point for emerging GP teams setting up in Singapore while still being subject to MAS oversight and anti-money-laundering requirements.

RVPI is calculated by dividing the current net asset value of a fund’s remaining (unrealized) portfolio by the total capital paid in by LPs. It represents the unrealized component of fund returns and is the difference between TVPI and DPI. A high RVPI in a mature fund may indicate the GP is holding investments longer than expected.

SEBI is India’s statutory regulatory authority for securities markets and investment funds, established under the SEBI Act, 1992. It regulates all Alternative Investment Funds (AIFs), mutual funds, portfolio managers, and market intermediaries operating in India.

Category I AIFs under the SEBI (Alternative Investment Funds) Regulations, 2012, include funds that invest in start-ups, early-stage ventures, social ventures, SMEs, and infrastructure. These funds are considered to have positive spillover effects on the economy and may receive incentives or concessions from SEBI, the Government of India, or other regulators. Sub-categories include Venture Capital Funds, Angel Funds, Social Venture Funds, and Infrastructure Funds.

Category II AIFs are funds that do not fall under Category I or III and do not undertake leverage or borrowing other than to meet day-to-day operational requirements (up to a regulatory cap). This is the most common AIF category in India and includes private equity funds, debt funds, and fund of funds that do not qualify as Category I.

Category III AIFs under SEBI regulations employ diverse or complex trading strategies and may use leverage including through investment in listed or unlisted derivatives. These include hedge funds, PIPE (Private Investment in Public Equity) funds, and other funds that trade with a view to making short-term returns. They are subject to higher regulatory reporting requirements compared to Category I and II.

Startup India is a Government of India initiative launched in 2016, administered by DPIIT, that provides recognized startups with benefits including a three-year tax holiday (Section 80-IAC), self-certification under labour and environmental laws, fast-tracked patent applications, and access to a dedicated Fund of Funds managed by SIDBI. To qualify, an entity must be incorporated as a private limited company, partnership firm, or LLP, be less than ten years old, and have annual turnover below INR 100 crore.

The Fund of Funds for Startups (FFS) is a Government of India initiative with a corpus of INR 10,000 crore, managed by the Small Industries Development Bank of India (SIDBI). Rather than investing directly in startups, SIDBI FFS acts as an anchor LP by making commitments to SEBI-registered AIFs (primarily Category I and II) that in turn invest in startups recognized under the Startup India programme.

A Singapore Limited Partnership, governed by the Limited Partnerships Act 2008, is the most common fund vehicle for PE/VC fund structures domiciled in Singapore. It provides GP/LP structural separation familiar to global institutional investors, flow-through tax treatment (the partnership itself is not taxed; income is taxed at the partner level), and compatibility with the 13R/13U tax exemption schemes.

SVCA is the national industry body representing the private equity and venture capital ecosystem in Singapore and Southeast Asia, with members comprising GPs, LPs, professional advisers, and government agencies. It promotes the asset class through research, events, policy advocacy, and professional development, and plays a role in shaping the regulatory and tax environment for fund managers in Singapore.

A side letter is a separate agreement between the GP and an individual LP that grants specific terms or concessions beyond those in the main Limited Partnership Agreement, such as reduced fees, enhanced reporting, co-investment rights, most-favoured-nation (MFN) clauses, or ESG-related commitments. Side letters are standard practice in institutional fundraising, and MFN provisions allow other LPs to elect into the most favourable terms granted.

TVPI measures the total value of a fund relative to the capital paid in by LPs, calculated as (cumulative distributions + residual portfolio value) divided by paid-in capital. It combines realized returns (distributions) and unrealized value (NAV of remaining holdings) to provide a comprehensive view of fund performance at any point during the fund’s life.

The Variable Capital Company is a corporate fund structure introduced by Singapore in January 2020 under the Variable Capital Companies Act. A VCC can be set up as a single standalone fund or as an umbrella structure with multiple sub-funds, each with segregated assets and liabilities. It offers operational flexibility such as issuing and redeeming shares without shareholder approval, making it well-suited for both open-ended and closed-ended PE/VC fund strategies.

The vintage year is the year in which a private equity or venture capital fund makes its first capital call or its first investment, used as a reference point for benchmarking performance against peer funds. Comparing funds within the same vintage year controls for macroeconomic and market cycle effects on returns.