How is committed capital different from AUM?
Committed capital = the money that LPs have pledged to the fund. PE management fees is based off this. HFs on the other hand base their management fees off AUM.
So how is committed capital different from AUM? I guess for PE firms, AUM is ALL the capital that consists of all its funds including the older funds (that's why AUM biases towards older PE firms like BX and KKR), so ig that's a pretty important distinction there - committed capital means only the money in the specific fund we're talking about.
But then, no way HFs base their management fees off ALL the capital across all its funds including the pods the LP didn't invest in?
What? In both vehicles investors pay for what they've committed? Difference is with a HF you give all your money over when you commit it, which isn't the same necessarily with PE. Because in PE there is invested capital and committed capital.
What's the diff
Simple Google solves most problems: https://www.reddit.com/r/CFA/comments/8su4t1/committed_capital_vs_asset…
ok. So PE LPs don't hand over all their money immediately, they only hand it over when the GP calls for it. Didn't know that
Sure. Regardless in both scenarios, all the money pledged, whether paid or not, is charged a management fee.
yep, got it now. Initially I thought PE hold their dry powder within the funds (have LPs pay up everything at the start like HFs), but now I know it's not the case. Gotcha
According to the SEC definition, NAV can also count towards aum.
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