Carried Interest

[tarun]

Hi

Got confused on Carried Interest

CI = (NAVbefore dist - Committed Capital) * 20% ;or

CI = (NAVbefore dist - NAVbefore dist of previous year) * 20%

Which one is correct

[tsv]

Provided that NAV before distribution exceeds committed capital, the general partner is entitled to carried interest, calculated as the given 20% multiplied by the increase in NAV before distributions. So, the carried interest is calculated as follows:

Carried interest = 20% × ($242.32 – $170.52) = $14.36 million.

[tarun]

Thanks tsv

I came across a ques in Mock A (am) (Yushan Capital Partners Case Scenario), where

1. the word “committed capital” is not written and the same is not considered anywhere in the solution.

2. Hurdle rate of 7% (given) is not taken care of.

3. CI is computed and given away as soon as NAV increases the PIC by a small margin.

[tarun]

@tarun

Thanks tsv

I came across a ques in Mock A (am) (Yushan Capital Partners Case Scenario), where

1. the word “committed capital” is not written and the same is not considered anywhere in the solution.

2. Hurdle rate of 7% (given) is not taken care of.

3. CI is computed and given away as soon as NAV increases the PIC by a small margin.

CI = (NAVbefore dist - NAVbefore dist of previous year) * 20% …this formula is used …and i dont get it.

[YasminNosair]

Yess I have been going back and forth trying to understand it but I can’t find an explanation and the model answer doesn’t elaborate on the calculations plus the first year it pays interest the NAV just barely exceeds cumulative PIC and it is only in the following years does the NAV exceed the total committed capital of 300 million so I have no idea where that 0.1 subtracted in year 2013 came from

I thought it was just me