Evaluating economics in a fund - carry, phantom equity, etc.

Anybody have good resources on how to get smart on evaluating different fund participation packages? I want to better understand how to think about carry vs. phantom equity, etc. and how to assess different vesting characteristics. Really just trying to get up to speed on the basics and also see if there are any terms I should look out for. Thanks!

 
Most Helpful

In general working for a PE fund has a number of income or capital streams. Base, bonus, carry, co-investment and GP commit.

Base, bonus straight forward.

Carry, probably easiest to model what the gross fund returns are over time and once the hurdle rate is cleared the fund will typically go into carry catch up with the typical carry rate being 20%. So modeling this dynamic is important.

Working for a PE fund usually offers ability to co-invest in deals. There is some overlap with GP commit, similar concept. But as these are cash outflows initially you’ll want to model this separately.

Hopefully that helps.

 

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