Month: April 2020

Evergreen funding (or evergreen finance) is the gradual infusion of capital into a new or recapitalized enterprise. This type of funding differs from the traditional funding situation in which all the capital required for a business venture is supplied up-front by venture capitalists or other investors as part of a private funding round. When the money is provided upfront, the company then invests in short-term, low-risk securities until it is ready to use the money for business operations.

Mezzanine financing is a hybrid of debt and equity financing that gives the lender the right to convert to an equity interest in the company in case of default, generally, after venture capital companies and other senior lenders are paid.

Plain vanilla is the most basic or standard version of a financial instrument, usually options, bonds, futures and swaps. It is the opposite of an exotic instrument, which alters the components of a traditional financial instrument, resulting in a more complex security.

A non-objecting beneficial owner (NOBO) is a beneficial owner of a company who gives permission to a financial intermediary to release their name and address to the companies or issuers in which they have bought securities. This allows companies to contact the beneficial owner directly with various communication related to the business. However, the SEC still maintains that beneficial owners should be contacted via an intermediary, such as a broker, for proxy materials.

A qualified domestic institutional investor or QDII is an institutional investor that has met certain qualifications to invest in securities outside of its home country.

A hospital revenue bond is a type of municipal bond intended to support the construction of new hospitals, nursing homes or related facilities. The bonds can also be used to purchase new equipment for these facilities or to finance upgrades for existing hospitals. The revenue created by the hospitals is then used to repay bondholders. Generally, bondholders receive payment only after paying the expenses of running the hospital is complete. This second-layer payment can create risk for bondholders if the hospital is not as profitable as anticipated.

Moral hazard is the risk that a party has not entered into a contract in good faith or has provided misleading information about its assets, liabilities, or credit capacity. In addition, moral hazard also may mean a party has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles. Moral hazards can be present at any time two parties come into agreement with one another. Each party in a contract may have the opportunity to gain from acting contrary to the principles laid out by the agreement.

A maximum drawdown (MDD) is the maximum observed loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum drawdown is an indicator of downside risk over a specified time period.

An underwriting group is a temporary association of investment bankers who wish to purchase a new issue of securities from an issuer in order to distribute the issue to investors at a profit. The underwriting group shares the risk and aids in the successful distribution of the new securities issue.