10s–2s Spread

Difference between 10‑year and 2‑year Treasury yields; positive spread indicates a steeper curve. Relevant to exit financing rates and portfolio duration choices. 

60/40 Portfolio

A traditional investment portfolio consisting of 60% stocks and 40% bonds. Commonly referenced when comparing alternative investments, private credit, and non‑correlated asset classes.

For a more details, see Is the 60/40 Investment Portfolio Dead?

Absorption Rate

A commercial real estate metric indicating how quickly available space is leased over time.

• Gross absorption: Total square footage leased, excluding vacated space.

• Net absorption: Space occupied at period‑end minus space occupied at period‑start, accounting for vacancies.
  Used to evaluate market strength across U.S. metro areas.

Adjusted funds from operations (AFFO)

A refined measure of REIT performance that adjusts Funds From Operations (FFO) by subtracting recurring capital expenditures. Commonly used by analysts assessing dividend stability and portfolio quality.

ADR (Average Daily Rate)

The average revenue earned per occupied hotel room per day. Calculated as:
ADR = Total Room Revenue ÷ Rooms Sold
A core metric in U.S. hospitality real estate underwriting.

After-Repair Value (ARV)

After repair value (ARV) is the projected value of a property after it has been repaired, renovated, or updated. ARV is commonly used in house flipping, a short-term real estate investment strategy in which a person buys a property (often a “fixer-upper” or distressed property), makes repairs and renovations, then sells it for a profit. To estimate if they’re going to have a large enough profit margin, a real estate investor will look for a property with a lower purchase price than its estimated ARV and renovation costs. ARV can also be used with any type of real estate investment in which renovations or improvements to the property would add value. (Note: Kirkland Capital Group uses "as-is" value, and does not consider ARV for loan underwriting.)

Alpha

Alpha is a risk-adjusted statistical measure of performance. Alpha takes the volatility (price risk) of a managed portfolio of equities or alternative assets and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha. Alpha can be thought of as the abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like the capital asset pricing model (CAPM). It typically is thought of as a measure of the "value-added" (or subtracted) by the portfolio manager in selecting the individual components of and engineering the interplay between components when constructing the portfolio. A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%. If a CAPM analysis estimates that a portfolio should earn 12% based on the risk of the portfolio, for example, but the portfolio actually earns 14%, the portfolio's alpha would be 2%. This 2% is the excess return over what would have been predicted using the same original inputs by the CAPM model.

Alternative Investment Platforms

Websites or companies that provide access to alternative assets—such as private credit, private equity, and real estate funds—along with education and due‑diligence tools.

Alternative Trading System (ATS)

A non‑exchange trading venue regulated by the SEC and registered as a broker‑dealer. Often used by institutions to trade large securities blocks without affecting market prices.

Anchor Tenant

The primary tenant in a retail or commercial property whose presence attracts additional tenants and consumer traffic.

Annual Percentage Rate (APR)

The interest rate charged or earned on a loan or investment, expressed as an annualized percentage.

Annual Percentage Yield (APY)

The total interest earned over a year, including the effects of compound interest. Common in savings accounts, CDs, and interest‑bearing accounts.

As-Is Valuation

This is the process of determining the market value of a property in its current condition, without considering any potential improvements or changes. It reflects the property’s existing state, including any wear and tear or structural issues, providing a realistic assessment of its worth at the time of appraisal.

Assets Under Management (AUM)

Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients.

Average Common Equity

Calculated by adding the common equity for the five most recent quarters and dividing by five.

Average Loan-to-value (LTV) Ratio

A lender’s average loan‑to‑value ratio across its loan portfolio. Higher LTV indicates higher lender risk.

Balloon Payment

An installment payment on a promissory note - usually the final one for discharging the debt - which is significantly larger than the other installment payments provided under the terms of the promissory note.

Beta-Risk

Measures the volatility of an investment relative to the overall market. A beta above 1.0 indicates higher sensitivity to market movements.

Blind Pool

A fund structure where investors commit capital before the manager identifies specific underlying assets.

Blockchain

Blockchain is a decentralized and distributed digital ledger technology that records transactions across multiple computers in a way that ensures the security, transparency, and immutability of the data. Each block in the chain contains a list of transactions and is linked to the previous block, forming a secure chain that is resistant to modification.

Bonus Depreciation

A U.S. tax incentive that allows accelerated depreciation of qualified property.(For more detail, see What Is Bonus Depreciation And How Does It Work? (biggerpockets.com))

Bridge Loan

A bridge loan is a short-term loan used until a person or company secures permanent financing or pays an existing obligation. It allows the borrower to meet current obligations by providing immediate cash flow. Bridge loans have relatively high interest rates and are usually backed by some form of collateral, such as real estate or the inventory of a business.

Broker-Dealer

A financial firm that is registered with regulatory authorities to facilitate the buying and selling of securities, such as stocks, bonds, and other financial instruments, on behalf of clients or for its own account, often involving both brokerage and trading activities.

Business Development Company (BDC)

Type of closed end fund that lends money to developing and often financially distressed companies with investor capital. They often use leverage to enhance their return.

Buyout Private Equity

The acquisition of a controlling interest of a private company.

Capital Appreciation

The change in the market value of a property or portfolio is adjusted for capital improvements and partial sales.

Capitalization Rate (Cap Rate)

Metric used in real estate to evaluate the profitability of an investment property. It is calculated by dividing the property's net operating income (NOI) by its current market value or purchase price.

Chartered Financial Analyst (CFA)

A Chartered Financial Analyst (CFA) is a globally-recognized professional designation given by the CFA Institute, formerly the AIMR (Association for Investment Management and Research), that measures and certifies the competence and integrity of financial analysts. Candidates are required to pass three levels of exams covering areas, such as accounting, economics, ethics, money management, and security analysis.

Kirkland Capital Group CIO Chris Carsley is a CFA.

Clawback

Refers to a mechanism that may require individuals or businesses to repay or return a portion of previously received tax benefits or deductions if certain conditions are not met in the future. 

Close of Escrow

The meeting between the buyer, seller, and lender (or their agents) where the property and funds legally change hands.

Commercial Mortgage-Backed Security (CMBS)

A type of fixed-income investment product that is backed by commercial real estate loans. These securities are created by pooling together various commercial mortgages, such as those for office buildings, hotels, and retail properties, and then selling the resulting cash flows to investors in the form of bonds. 

Commercial real estate

Commercial properties involve tenants that are businesses or multifamily apartments with five or more units.

Commodity Futures Trading Commission (CFTC)

It is an independent agency of the United States government that regulates the futures and options markets. The CFTC's mission is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation. This includes protecting market participants and the public from fraud, manipulation, abusive practices, and systemic risk related to derivatives, including futures and swaps.

Conventional loan

A conventional mortgage or conventional loan is any type of loan that is not offered or secured by a government entity. Instead, conventional mortgages are available through private lenders, such as banks, credit unions, and mortgage companies. They usually do not include specialized mortgage types such as bridge loans, short-term loans, or no-doc loans.

Core Inflation

Inflation excluding food and energy prices, used to gauge underlying price trends.

Credit Crunch

A sudden sharp reduction in the availability of money or credit from banks and other lenders.

Credit Spreads 

The credit spread is the difference in the interest rate offered to investors by a bond versus another debt security.

Debt Service Coverage Ratio (DSCR)

The annual net operating income from a property is divided by the annual cost of debt service. A DSCR below 1 means the property is generating insufficient cash flow to cover debt payments.

DeepSeek

A Chinese AI company that claimed to develop a model they call R1 that is as powerful as any US AI model but operates at a fraction of the cost. Some of these claims have been debunked.

Digital Asset Market Clarity Act

The Digital Asset Market Clarity Act is a bill aimed at establishing a comprehensive regulatory framework for digital assets in the United States, clarifying oversight responsibilities between the SEC and CFTC, and promoting responsible innovation in the digital asset space.

Dispersion

With regards to investments, it is implying greater variance in investments and between investments. The range of potential outcomes is greater. This is of importance to long-short hedge funds as they need longs and shorts in their portfolio to not all move in the same direction to create excess returns on both sides of their book.

Duration

A measure of a fixed income instrument's sensitivity to interest rate changes. It indicates how much the price of the instrument is expected to fluctuate when interest rates change. A shorter duration means the instrument has less exposure to interest rate risk, while a longer duration implies greater sensitivity to interest rate movements

Dry Powder

Is a slang term for cash or highly liquid cash-like investments.

Emerging Manager

This can mean many things to different allocators. In general, it is a manager that is early on in their growth cycle and has a shorter track record and smaller assets under management.

Excess Return

A return achieved above and beyond the return of a proxy or benchmark.

Experiential Retail

A strategy that focuses on creating immersive, engaging in-store experiences that build emotional connections with customers beyond traditional shopping. Interactive product testing zones where customers engage with the product. For example, the Nike flagship store which features a basketball court.

Extend and Pretend

Refers to the practice where lenders extend the terms of a loan to a struggling borrower, often without addressing the underlying financial issues, in order to avoid recognizing the loan as non-performing or impaired. This approach allows lenders to maintain the appearance of a healthy loan portfolio while postponing the need to recognize losses.

FFO (Funds From Operations)

A ratio intended to highlight the amount of cash generated by a company's real estate portfolio relative to its total operating cash flow. FFO is equal to net income, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization.

Fair Market Value (FMV)

The highest price that a willing, but not compelled, buyer would pay, and the lowest price that a willing, but not compelled, the seller would accept.

Federal Open Market Committee (FOMC)

The FOMC sets the direction of U.S. monetary policy, primarily through open market operations, which involve buying and selling government securities. These actions affect interest rates, inflation, and overall economic growth.

Fixed-Rate Mortgage (FRM)

A mortgage in which the monthly principal and interest payments remain the same throughout the life of the loan.

Foreclosure

Foreclosure is the legal process by which a lender attempts to recover the amount owed on a defaulted loan by taking ownership of the mortgaged property and selling it.

Fund Expenses

All the expenses directly related to the fund and its operations. (Example: Administration, tax, legal, accounting, reporting, etc.)

Fund Gates

A mechanism that allows fund managers to limit or halt redemptions from the fund. This is typically used to prevent a “run on the fund,” especially when the assets held by the fund are illiquid and cannot be quickly converted to cash.

Gateway City/Market

In commercial real estate, a gateway market is a major international city with a large population, economic diversity, cultural vibrancy, and strong demand for properties. Gateway markets are often the first entry point for travelers and businesses into a country, and they have world-class transportation infrastructure. Some examples of gateway markets in the US are New York, San Francisco, Miami, and Los Angeles

Generative AI

Generative artificial intelligence or generative AI is a type of artificial intelligence (AI) system capable of generating text, images, or other media in response to prompts. Generative AI models learn the patterns and structure of their input training data, and then generate new data that has similar characteristics.

Gross Domestic Product

Value of all finished goods and services in a country for a specific time. Used as an economic snapshot in time to determine size and growth rate of the economy.

Hard Money Lender

Individuals or companies providing asset-based loans that are secured by the underlying real estate. Hard money is based on the property's value, not the borrower's creditworthiness. Therefore, there is no concern about the borrower's ability to repay the loan. These lenders do not fall under banking regulations.

High-Water Mark

A high-water mark is the highest peak in value that an investment fund or account has reached. This term is often used in the context of fund manager compensation, which is performance-based. The high-water mark ensures the manager does not get paid large sums for poor performance.

Housing Affordability Index

Measures the ability of an average family to afford a home in a specific location. It compares the median household income to the income needed to qualify for a mortgage on a median-priced home. Higher the index number the more affordable a home is in that location.

Impound

That portion of the mortgagor’s monthly payments is held by the lender to pay for property taxes or hazard insurance premiums as they become due. KCG does not impound for either property taxes or hazard insurance premiums; this is common for most private lenders.

Infrastructure Investing

An investment in a real asset that pertains to the logistics or utility services. (Examples: bridges, roads, sewage systems, water systems, and energy systems.)

Interest-Only Payment Loan

A non-amortizing loan in which the lender receives interest during the term of the loan and principal is repaid in a lump sum at maturity.

Interest Rate Spread

Simply, the net between one interest rate and another. It is used across the financial industry. For example for the Kirkland Income Fund, when a loan is sold to another fund, if the interest rate on the loan to the borrower is 11.0%, servicing costs 1.0%, and the loan is sold for an 8.0% coupon, then KIF investors would continue to receive a 2.0% interest rate spread on that loan.

Investing

Investing generally involves holding assets long-term to capitalize on continuing trends and growth of the asset.

Investment Cycle

This definition is regarding a period covering both an expanding and a contracting economic, market, or business period.

Jobs Report

Monthly report published by the US Bureau of Labor Statistics. Shows change in employment and wages in the United States in comparison to the previous month. The data is aggregated from household and employer surveys. 

Junk Bond

A junk bond is debt that has been given a low credit rating by a ratings agency, below investment grade.

Labor Productivity

Is a measure of workers output per unit of time (Hour).  Measured in terms of Gross Domestic Product and goods and services. (Total output of company or country/Total number of hours worked).

Laissez-faire

An economic philosophy advocating for minimal government intervention in business and market affairs. The term comes from French, meaning “let do” or “let it be,” and refers to the idea that economies function best when individuals and businesses are free to operate without regulatory constraints.

Levered Loans

A leveraged Loan is a loan made to borrowers with already high levels of debt and/or a low credit rating. Often these loans are syndicated to corporations.

LIBOR: London Interbank Offered Rate

A benchmark forward looking interest rate that is utilized by major global banks to determine short term lending rates between each other.

Lien Position

Lien position, also called lien priority, is the order of seniority in which the law recognizes lenders’ claims against a property. It determines the sequence of who gets paid in the event of a foreclosure. This is why it is important to have a good understanding of what the lien priority is in any real estate investment. (Note: Kirkland Capital Group only makes first lien mortgages.)

Loan Default

In finance, default is a failure to meet the legal obligations (or conditions) of a loan. This can encompass not just failing to make a payment, but also can be triggered by a borrower not adhering to loan covenants or rules in the loan agreement such as reporting, not paying property taxes, or not carrying the proper property insurance.

Loan Due Diligence

A comprehensive process undertaken by lenders to thoroughly investigate and verify the information provided by a borrower in a loan application. At KCG, our due diligence process involves verifying the borrower's credit history, financial statements, tax returns, and any legal issues that may affect their ability to repay the loan. We also assess the property's value, title, and any existing liens or encumbrances. This meticulous process ensures that we only approve loans that demonstrate a high probability of timely repayment, thereby protecting our investors' interests and maintaining the integrity of our loan portfolio.

Loan-to-Value (LTV)

The loan-to-value (LTV) ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, loan assessments with high LTV ratios are considered higher-risk loans.

An LTV ratio is calculated by dividing the amount borrowed by the appraised value of the property, expressed as a percentage. For example on a purchase, if a property is appraised at $1,000,000, and there is a $250,000 down payment, the loan is $750,000. This results in an LTV ratio of 75% (i.e., 750,000/1,000,000).

Loan Term Sheet

A non-binding document outlining key terms of a proposed loan agreement. It provides a framework for negotiating the loan contract, detailing aspects like loan amount, interest rate, term, collateral, and conditions. It ensures both borrower and lender agree on major terms before due diligence. KCG issues it when confident in closing the loan based on borrower/broker claims at that time.

Loan Underwriting

The analysis of risk and the decision whether to make a loan to a potential homebuyer based on credit, employment, assets, and other factors.

Monetary Policy

Set of tools/actions used by the central bank to control the supply of money and promote or hinder economic growth. These tools include changing interest rates, bank reserve requirements, buying and selling of bonds.

Net Return

The amount of money received from an investment after the management fee and all costs have been paid.

Nonfarm payroll

The nonfarm payroll measures the number of workers in the U.S. except those in farming, private households, proprietors, non-profit employees, and active military.

Non-negotiables (Due Diligence)

These are hard line factors that an investor determines are not open for discussion or reconsideration when performing due diligence on an investment.

Opportunity Zone (OZ)

An Opportunity Zone is a designation and investment program created by the Tax Cuts and Jobs Act of 2017 allowing for certain investments in lower income areas to have tax advantages.

PPI/CPI

Producer and Consumer Price Indexes, measuring inflation.

Preferred Return

A preferred return is a profit distribution preference whereby profits, are distributed to one class of equity before another. In the case of funds, it is used in conjunction with incentive fees to define a minimum return to investors to be achieved before a carry (The unrealized share of profits to the GP that may accumulate on an annual basis) is permitted.

Price-to-Forward Earning Ratio 

Also known as Forward P/E ratio (or forward price-to-earnings ratio) divides the current share price of a company by the estimated future (“forward”) earnings per share (EPS) of that company. For valuation purposes, a forward P/E ratio is typically considered more relevant than a historical P/E ratio.

Private Credit

Private credit is an asset defined by non-bank lending where the debt is not issued or traded on the public markets. Private credit can also be referred to as "direct lending" or "private lending". The private credit market has shifted away from banks in recent decades.

Private Loans

A loan made with private money to an individual or corporation. Loan sourced not from a bank.

Private non-bank Lender

Individuals or companies providing asset-based loans that are secured by the underlying real estate. These loans are based on the property's value and the borrower's creditworthiness. The ability of the borrower to repay the loan is an important part of the underwriting process. These lenders do not fall under banking regulations.

“Pump & Dump”

A manipulative scheme to boost the valuation of a security through fake recommendations or falsified valuations and then sell.