Resources

Private Equity and Entrepreneurship Glossary

Hart-Scott-Rodino Act

A law requiring entities that acquire certain amounts of stock or assets of a company to inform the Federal Trade Commission and the Department of Justice and to observe a waiting period before completing the transaction.

Harvest

To generate cash or stock from the sale or IPO of companies in a private equity portfolio of investments.

Hedge fund

An investment fund that has the ability to use leverage, take short positions in securities, or use a variety of derivative instruments in order to achieve a return that is relatively less correlated to the performance of typical indices (such as the S&P 500) than traditional long-only funds. Hedge fund managers are typically compensated based on assets under management as well as fund performance.

High yield debt

Debt issued via public offering or public placement (Rule 144A) that is rated below investment grade by S&P or Moody’s.  This means that the debt is rated below the top four rating categories (i.e. S&P BB+, Moody’s Ba2 or below).  The lower rating is indicative of higher risk of default, and therefore the debt carries a higher coupon or yield than investment grade debt.  Also referred to as Junk bonds or Sub-investment grade debt.

Hockey stick

The general shape and form of a chart showing revenue, customers, cash or some other financial or operational measure that increases dramatically at some point in the future. Entrepreneurs often develop business plans with hockey stick charts to impress potential investors.

Holding period

Amount of time an investment remains in a portfolio.

Hot issue

Stock in an initial public offering that is in high demand.

Hot money

Capital from investors that have no tolerance for lack of results by the investment manager and move quickly to withdraw at the first sign of trouble.

Hurdle rate

A minimum rate of return required before an investor will make an investment.