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Private equity preferred return (hurdle rate)
Given PE company X
at time 0, X = 100
at time 3 (exit), X = 135 (net of fees)
preferred return is 10%. Carry is 20%. How much does the GP make?
The IRR is 10.52%, above the hurdle, so there is some amount of carry.
Here is my question.
Is the carry the full 20% of the profit, or is it that portion above a 10% Net IRR?
Stated differently, is it:
A:
.2 * 35 = 7 (this is how Schweser solved it)
or, B:
35 - [profits required to ensure LPs have 10% IRR, or about 33.1] = 1.9 (what I expected)
or, is it only 20% of the amount above the preferred return, .2 * 1.9? (what I saw on random website X)
I could swear that the most common terms you find in PPMs are in the form of B, but I'm not sure what CFA expects. Maybe I should read the books :s ----thanks
Edited 1 time(s). Last edit at Wednesday, May 26, 2010 at 11:52PM by hawgdriver. |
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发表于 2011-7-13 14:36
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