Alternative investments - Private Equity Valuation question

CFA Level II Alternative Investments
#1

I’ve decided to tackle L2 by leaving the material with heavy calcs to next year so currently working my way through alternative investments. Anyway, on the off chance that anyone out there has gone through this, I have a question:

In “Concept in Action: Evaluating a Private Equity Fund” (p161 and 162 of AI) the figures that feed into the gross and net IRR have left me confused. I’m thinking there’s a typo on the years (eg, 2000 should be 2001 and there shouldn’t be a 2006 at all) but not 100% on it… my understanding is that you take called down capital at the beginning of the period and add the operating result from the year before - How is the year 2000 in the solution? I’ve possibly got this wrong but would appreciate someone explaining this to me - they brush over some of the calcs fairly rapidly in this section.

#2

Not sure if these numbers are the same… We had this in my year on pg 76-77.

For the Net IRR - cash flows are net of fees and Carried Interest

2001 -50 (Called Down) 2002 -15 (Called Down) - 1 Mgmt Fees of 2001 -5 (Op Results of 2001) = -21 2003 -10 -1.3-15 = -26.3 2004 -25-1.5+25=-1.5 2005 -10 -2 +45 -3.84 (Carried Interest) = +29.16 2006 -5 -2.2 + 55 - 6.79 = 41.01 2007 105 (Op Results) -2.3 (Mgmt fees) -11.18 (Carrie Int) = 91.52

Use above - calculate IRR = 11.3%

Gross IRR -> No fees, No Carried Interest 2001 -50 (Called Down) 2002 -15 (Called Down) -5 (Op Results of 2001) = -20 2003 -10 -15 = -25 2004 -25+25=0 2005 -10 +45 = +35 2006 -5 + 55 = 50 2007 105 (Op Results)

Gross IRR=16.1%

IRR calculated by entering all these using the Cash flows function.

#3

OK, thanks for that - I’ve been calculating it correctly so I think there may be a typo.The table presented has data from 2001 through 2006 but the solution runs 2000 through 2006. I’m happy to accept that and move on but always good to get confirmation, if anyone else runs into this, as it looks like something we’re going to need to know.

Thanks again