RWA Terms Glossary: Plain-English Definitions

RWA and private markets content uses a lot of terms that rarely get defined in plain language. This glossary covers the common ones in one sentence each, grouped by what they describe: fund mechanics, structure, and risk or liquidity. Each term links to a fuller article if you want the full explanation, the math, or the checklist behind it. Use this page as a quick reference while reading a product page or an offering document, not as a substitute for the formal documents themselves.

Fund Mechanics Terms

NAV (Net Asset Value) is the current value of a fund's assets minus its liabilities, usually expressed per share or per token, and it is the basis most fund-type products use to price entries, exits, and performance.

Capital call is a request from the fund manager for investors to send in capital they already committed, typically issued in stages as the fund deploys money into new positions rather than all at once at signing.

Hurdle rate is a minimum return a fund-type product must clear before the manager starts collecting performance-based fees, and it protects investors from paying a profit share on mediocre returns. See what a hurdle rate and preferred return mean for how it interacts with the waterfall.

Distribution waterfall is the order in which a fund pays out cash — typically return of capital first, then a preferred return, then profit split between investors and the manager — and it determines who gets paid, and when. See how private fund payouts flow through a waterfall.

IRR (internal rate of return) is an annualized return figure that accounts for the timing of cash flows, which makes it sensitive to when capital goes in and comes out, not just how much.

MOIC (multiple on invested capital) is simply total value returned divided by capital invested, and it tells you the multiple on your money without factoring in how long it took to get there — pairing it with IRR gives a fuller picture than either number alone.

GP commitment is the amount of the fund's own capital the manager (the general partner) invests alongside outside investors, which is one way managers signal that their interests are aligned with the fund's outcome. See GP commitment and manager skin in the game.

Structure Terms

SPV (special purpose vehicle) is a standalone legal entity created to hold a specific asset or pool of assets, isolating that exposure from the manager's other business and other funds. See what an SPV structure is behind RWA products.

Capital structure / seniority describes the ranking of different claims on an issuer's assets — who gets paid first if something goes wrong — and where a specific RWA product sits in that order changes its risk profile even when the underlying is the same. See capital structure and seniority: where you sit matters.

Fund-type RWA pools investor capital into a portfolio a manager actively invests and divests over time, as opposed to a bond-type product that pays a defined return on a defined schedule. See how to read a fund-type RWA product.

Side-by-side account is a separate vehicle a manager runs in parallel with a main fund, often for a large or strategic investor, and it can carry different fees, liquidity, or allocation terms than the main fund. See what a side-by-side account means in private funds.

Custody refers to who physically or legally holds an underlying asset — cash, securities, or a physical commodity — on behalf of a fund or token holders, and how that custodian's claims are verified. See custody models for physical-backed RWA.

Transfer agent is the party responsible for keeping the official record of who owns what in a fund, processing subscriptions and redemptions against that record.

Risk and Liquidity Terms

Lock-up period is a set span of time after investing during which an investor cannot redeem or sell their position, regardless of how the underlying assets are performing.

Gate is a limit a fund can place on the total amount of redemptions it processes in a given period, used to prevent a rush of exits from forcing the manager into disorderly asset sales.

Illiquidity premium is the extra return investors are theoretically compensated for accepting when an asset cannot be quickly sold at a fair price, though the premium is never guaranteed to show up. See how time gets priced into non-listed assets.

Redemption is the process of converting a fund interest or token back into cash, and the mechanics — timing, pricing, and any limits — differ sharply between open-end and closed-end structures. See redemption mechanics: open-end vs closed-end RWA funds.

Covenant is a contractual condition a borrower agrees to in a private bond or loan, meant to protect the lender by restricting certain actions or requiring certain financial thresholds. See covenants and collateral: what protects a private bond holder.

Fair value hierarchy is a framework (commonly Level 1, 2, and 3) that ranks how directly an asset's stated value comes from an observable market price versus a model or manager estimate, which matters most for assets without a public ticker. See the fair value hierarchy explained for RWA valuation.

KYC / eligibility / suitability are the checks a platform or manager runs before letting an investor access a product, covering identity verification, regulatory eligibility, and whether the product fits the investor's situation. See why RWA asks for more than standard KYC.

How to Use This Glossary on BiFu

Keep this page open while you read a product's formal documents on the BiFu RWA page. When a document uses one of these terms without explaining it, come back here for the plain-English version, then follow the link if you need the full mechanics. This glossary explains what terms mean; it does not tell you whether any specific product's terms are favorable, and the numbers, fees, and eligibility rules attached to any real product are set by that product's own documents, not by this page.

FAQ

What does NAV per token mean in a tokenized fund?

NAV per token is the fund's total net asset value divided by the number of tokens outstanding, giving each token a proportional claim on the fund's assets. It changes as the underlying portfolio's value changes and as new tokens are issued or redeemed.

What is the difference between IRR and MOIC?

IRR is an annualized return that accounts for when cash moved in and out, while MOIC is a simple multiple of total value returned over capital invested with no time dimension. A fund can have a high MOIC over a long period but a modest IRR, or a high IRR over a short period with a modest MOIC.

Why do private funds use lock-ups and gates instead of daily redemption?

Many of the underlying assets in private funds cannot be sold quickly at a fair price, so lock-ups and gates give the manager time to sell assets in an orderly way instead of being forced into fire sales to meet redemption requests. This protects remaining investors from bearing the cost of other investors' rapid exits.

Where can I find these terms explained in a real product's documents?

Look in the offering memorandum, subscription agreement, or fund prospectus for the product, which should define its specific terms, fees, and eligibility requirements. If a product's marketing material uses a term this glossary covers without explaining how it applies to that specific product, that is worth raising before you rely on it.

This content is for educational purposes only and does not constitute financial, investment, legal, tax, or trading advice. RWA products involve risk, including possible loss of principal. Always review product documents and risk disclosures before participating.

Related Reading

• Reading RWA offering documents: a field guide
• Red flags to check in an RWA offering document
• How to track RWA positions and key dates