J-curve

The J curve is used to illustrate the historical tendency of private equity funds to deliver negative returns in early years and investment gains in the outlying years as the portfolios of companies mature.

In the early years of the fund, a number of factors contribute to negative returns including management fees, investment costs and under-performing investments that are identified early and written down. Over time the fund will begin to experience unrealized gains followed eventually by events in which gains are realized.

The steeper the positive part of the J curve, the quicker cash is returned to investors. A private equity firm that can make quick returns to investors provides investors with the opportunity to reinvest that cash elsewhere.

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Source: Wikipedia https://en.wikipedia.org/wiki/J_curve