the amount that must be repaid when the asset (that is, the loan)
matures. It also refers to the market maker (or stock jobber)
who acts as principal on his or her firm’s account in trading se-
curities. A broker (that is, agent)
deals only on somebody
else’s behalf.
Principal-only bond
A bond on which no payment of interest is due. The bond
is issued at a discount, and on maturity its
full face value
is repaid.
Private bank
Originally a bank owned by a limited number of partners, each
of whom bears unlimited liability for the business. Private
banks of this sort were popular in
Switzerland in the days when
secrets were easier to keep. In recent years, the expression has
come to mean any bank that caters
for the needs of wealthy in-
dividuals, of whom there is an increasing number in Europe
and Asia as family businesses are sold to large corporations.
Most big international banks have private banking divisions,
which aim to preserve their clients’ capital and
to generate a
reasonable income without too much risk. Some of these
banks are still Swiss.
Private equity
The business once known simply as venture capital but now
combined with other forms of financing.
Private equity is di-
rected at three main targets:
private companies (often in fast-growing, high-tech
industries) that aim one day to issue shares to the public;
middle-sized firms whose
managers are planning buy-
outs, joint ventures or some other form of reconstruction;
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managers of (investment) funds which allocate dollops
of capital to specialist advisers
active in a particular
market niche, such as life sciences.
Venture capital requires a higher than average return for a
higher than average degree of risk. For most investors in
private equity, the payoff comes
when the company in which
they have invested makes a public offer of its shares or is taken
over.
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