CAIA LEVEL 2 - Sept 2018 : PME calculation (private equity benchmarking

CAIA
#1

Hi there to all candidates for CAIA Level 2 in sept 2018.

I’m struggling to make sense of the calculation of the PME on pag 225-226 on the CAIA Official book and to reconcile it with Kaplan Schweser exercise on pag 345.

I would dare to say that for me they are both wrong for different reasons. First the CAIA book calls FV (D) what I would call FV © however I’m not able to calculate all the components required on pag.226 to get to the PME ratio for the 2 funds.

Regarding the Kaplan exercise instead, I would argue that I(T) should be the one corresponding to the year 2015 matching the time of the NAV.

Any idea please? It appears that internet cannot help. I searched for alternative examples and even the Qbank but unsuccessfully.

Is anyone using uppermark that can provide some light.

Thank you for any help.

cheers.

c

#2

I have the official book, but never cracked it. Using Kaplan book. On page 345, it makes sense. Just consider if you use the cashflow to buy SP500. Outflow (from LP to GP) is treated as cash to buy Sp500, inflow (from GP to LP) is treated as sell SP500. I consider NAV as final inflow from the fund. Hope this helps you some.

This is a ratio of of the money in vs money out (contribution is in and distribution is out), however, instead of straight cash, it treated those cash as investing into public market index. Consider if total money into the fund is 500, and total money out of fund is 700. You in and out ration is 700/500=1.4. However, what if the same money is invested in public, how the outcome could be different…thus a way to compare PE vs public market.