Ratchet

Used with a variety of derivative structures in which key variables such as strike price can be reset, usually in an assymetrical manner. In some cases this leads to investors´ gains being locked in regardless of future movements in the underlying asset.
For private equity funds a structure that determines the eventual equity allocation between groups of shareholders. It enables a management team to increase its share of equity in a company if the company is performing well. The equity allocation in a company varies, depending on the performance of the company and the rate of return that the private equity firm achieves.