Reading 49: Private Equity Valuation-LOS i 习题精选

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发表于 2011-3-22 14:35 | 只看该作者

A private equity fund pays a management fee of 3% of PIC and carried interest of 20% to the general partner using the total return method based on committed capital. In 2008 the fund has drawn down 80% of its committed capital of $250 million, and has a net asset value (NAV) before distributions of $260 million. The 2008 management fee and carried interest paid, respectively, is (in millions):

Management fee:

Carried interest:

7.5

50.0

7.8

2.0

6.0

2.0

(All dollar figures are in millions)
Management fee is paid annually on paid-in capital (PIC), which is just cumulative capital drawn down. 2008 management fee is thus 3% of $200, or $6.0.

Carried interest is the profit distributed to the general partner. The fund specifies a total return method based on committed capital and is calculated as the excess of NAV before distributions above committed capital. The 2008 carried interest paid out is then 20% of ($260 ? $250) = $2.0.

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发表于 2011-3-22 14:35 | 只看该作者

Dr. Jason Bruno is a qualified investor in the US who is considering a $10 million investment in a private equity fund. Upon reading the fund’s prospectus, Dr. Bruno encounters several contract terms and expressions with which he is unfamiliar. In particular, he would like to know the meaning of ratchet and distributed paid-in capital (DPI). The most appropriate answer by the fund’s manager to Dr. Bruno would be that ratchet and DPI, respectively, is:

Ratchet

DPI

The general partner’s share of
fund profits

The general partner’s realized return

The allocation of equity between shareholders and management

The limited partner’s realized return from the fund

The year the fund was set up

Dividends paid out as a fraction of paid-in capital

Ratchet is a contract term that specifies the allocation of equity between management and shareholders.

DPI, or distributed to paid-in capital, is the cumulative distributions paid out from the fund as a fraction of cumulative invested capital. DPI measures the limited partners’ realized return from the fund.

Note: The GP’s share of fund profits is called carried interest. The year the fund was set up is called the vintage. There should be no distinction between realized and unrealized return for the GP. Also, there is no term for dividends over paid-in capital as dividends are seldom paid out from a private equity fund.

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发表于 2011-3-22 14:36 | 只看该作者

The net asset value (NAV) after distributions of a private equity fund is calculated as:

A)	NAV before distributions + Capital called down – Management fees.

B)	NAV before distributions – Carried interest – Distributions.

C)	NAV before distributions + Carried interest – Distributions.

NAV after distributions is calculated as NAV before distributions minus carried interest (the general partner’s profit from the fund) minus distributions from the fund.

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发表于 2011-3-22 14:36 | 只看该作者

The Nishan private equity fund was established five years ago and currently has a paid-in capital of $300 million and total committed capital of $500 million. The fund paid its first distribution three years ago of $50 million, $100 million the year after and $200 million last year. The fund’s distributed to paid-in capital (DPI) multiple is closest to:

1.17.

0.67.

0.70.

The DPI multiple is calculated as the cumulative distributions paid by the private equity fund divided by the paid-in capital (the portion of committed capital drawn down).

Nishan’s current DPI is: ($50 + $100 + $200) / $300 = 1.17