Quick question - Private Equity before, carried, interest, question

RealEstate_CFA

Is Committed Capital and Paid in Capital same?
In calculating the carrier interest - Schweser says %carried interest x (Change in NAV before distribution)
In one of the questions in Qbank, it says %of NAV before before distributions less committed capital.
Confused. Any help

bchadwick

Should i ignore the first formula. Is there a reason why they gave that formula? yeah I do remember that question.

RepoToronto

Paid in capital is year-on-year how much capital is brought into the venture.
committed capital is usually a higher number - how much the PE investor decided to invest in the first place.
In the first total return method - carrying interest is paid only when the NAV before distribution exceeds the Committed Capital. This statement in Qbank refers to that.
There was a question in the Sample 1 also related to this, if you remember.
Only when the NAV before distributions  Committed Capital - does the carrying interest portion kick in. Committed capital kind of sets the hurdle rate so that has to be exceeded before the GP gets any money from the deal.!