Fees start on day one, and new deals sit at about cost, so a fund starts out down on paper. Then companies grow and get sold. That shape is the J-curve.
What the film says
Why does a good fund look like a loser in year two? Because you start paying fees on day one. But new deals are still held at about what they cost. So on paper, you're down. Then companies grow, and some get sold. The line turns, and climbs above zero. That shape is the J-curve. Red in year two doesn't mean a bad fund.
In the glossary: J-curve
A simple example with round numbers, not advice. Terms vary by fund.
See an error?