Session 13: Alternative Asset Valuation Reading 49: Private Equity Valuation
LOS g: Explain the risks and costs of investing in private equity.
Which of the following terms correctly describes the risk to a private equity firm in long-term interest and exchange rates, and the provision that specifies the method of profit distribution between the limited partners (LPs) and general partner (GP), respectively?
|
Risk in long-term rates |
Profit distribution |
A) |
Capital risk |
Carried interest | | |
B) |
Market risk |
Distribution waterfall | | |
C) |
Market risk |
Carried interest | | |
Market risk describes the risk of how changes in interest rate, exchange rate and other macroeconomic factors affect private equity investments.
The method of profit distribution between the LPs and GP is called distribution waterfall.
Carried interest is the GP’s share of fund profits. Capital risk refers to the risk of capital depletion in a private equity fund and the risk of obtaining additional financing.
[此贴子已经被作者于2011-3-22 15:19:21编辑过] |