GP Stakes Model Template

Based on the most helpful WSO content, here’s what you need to know about GP stakes modeling and resources to help you prepare:

1. Valuation Streams:

   • Fee-Related Earnings (FRE): This is the most stable and predictable revenue stream, often valued at a multiple of 20-30x Distributable Earnings (DE). FRE is derived from management fees tied to assets under management (AUM).
   • GP Share of Carry: This represents the General Partner's share of carried interest, typically 20% of the carry pool after meeting the hurdle rate. Valuation here often involves a probability-weighted DCF approach, as carry realization depends on fund performance and timing.
   • Balance Sheet Investments: This includes the GP's share of returns from their own capital invested in the fund. Like carry, this is also valued using a probability-weighted DCF or a haircut to the accrued balance sheet value.

2. Modeling Approach:

   • For FRE, you’ll use a straightforward entry/exit multiple approach.
   • For carry and balance sheet investments, you’ll need to build a probability-weighted DCF model. This involves:
     • Estimating future cash flows from carry and investments.
     • Applying probabilities to different scenarios (e.g., base case, upside, downside).
     • Discounting these cash flows to present value using an appropriate discount rate.

3. Resources:

   • While a fully built-out GP stakes model may not be readily available for free, the WSO Free Financial Modeling Series offers lessons on DCF, LBO, and other valuation techniques that can be adapted for GP stakes modeling. These lessons include templates and practical examples.
   • Additionally, the 27 financial modeling templates provided in the WSO swipe file could serve as a starting point for building your own GP stakes model.

4. Tips for Building a Probability-Weighted Waterfall:

   • Start by mapping out the fund’s cash flow structure, including management fees, carry, and GP investments.
   • Incorporate hurdle rates and catch-up provisions for carry calculations.
   • Use scenario analysis to assign probabilities to different fund performance outcomes.
   • Build a waterfall model to allocate returns between LPs and the GP based on the fund’s performance.

If you’re looking for a specific GP stakes model, consider reaching out to professionals in the space or leveraging WSO’s network to connect with someone who has experience in this niche. You can also explore WSO forums for threads discussing GP stakes modeling, as users often share insights and resources there.

Sources: Do you think it's justifiable to ask for 25% of the GP for being the fund raiser for the projects?, Secondary PE Modeling, GP Stakes Modelling/Metrics, GP Stakes Modelling