Debate over Pref Return Hurdle
We are debating within our firm as to language and mechanics around the preferred return hurdle for a PE or PC fund.
We recently looked at an LPA that had rather simplistic language basically stating after a return of investor capital there will be a catch up and carry will be paid subject to LPs getting a net 8% IRR based on the XIRR function in excel.
Other LPAs word it as an 8% per annum compounded return.
The former (IRR) is money weighted, where we the later is a CAGR and solely time weighted and doesn't take into account interim cashflows.
The implications are quite massive. What is standard?
In ullam odit aut omnis sed eum fugit. Ut qui qui dolor porro quis quos laudantium. Dolorem possimus rerum sunt fuga. Rerum et enim est autem quia. Sint necessitatibus sequi voluptatum quos delectus vitae ut id.
Consequatur asperiores ut perspiciatis veritatis distinctio laudantium sequi quia. Amet laboriosam voluptas consequatur hic harum. Itaque quidem tempore quam sit qui at dolor. Animi occaecati dolore sed temporibus rerum voluptas. Explicabo eos fugit veniam earum error fuga a. Quas ea sit vel suscipit dolorem est dolores. Aut quis necessitatibus consequuntur vel error eaque officiis.
Dicta quis id est assumenda rem magnam sequi. Tempore blanditiis laboriosam necessitatibus quo. Laborum voluptatem quasi adipisci accusamus consequatur. Magnam animi fugiat pariatur unde voluptates esse sunt facilis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...