Hello,
I have a modeling test for a Boutique for their secondaries team doing GP/LP-leds for an Associate position.
1) I would appreciate any info on tiered interest and how to model that.
2) Does anyone have any past cases / point me in the right direction?
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Based on the most helpful WSO content, here’s what you need to know:
1) Tiered Interest Modeling:
- For GP/LP-led secondaries, tiered interest structures often involve modeling different return thresholds where the carried interest or profit-sharing changes. For example: - Below a certain IRR (e.g., 8%), the LPs might receive all distributions. - Between 8%-12% IRR, the GP might start earning a share of the profits (e.g., 20% carry). - Above 12% IRR, the GP’s carry might increase (e.g., 25% carry).
- To model this, you’ll need to: - Build a cash flow waterfall that calculates distributions to LPs and GPs based on these thresholds. - Use IRR hurdles to determine when the GP starts earning carry. - Ensure the model accounts for clawbacks or catch-ups if applicable.
2) Resources for Past Cases and Guidance:
- Check out the WSO Private Equity Interview Prep resources, which include detailed LBO tests and case studies. These can provide a solid foundation for understanding secondaries modeling. - For GP-led deals, focus on understanding continuation funds and single-asset secondaries. For LP-led deals, practice bottoms-up analysis of underlying portfolio companies and apply appropriate discount rates to unfunded portions. - Review the following resources mentioned in WSO threads: - "An Introduction to Private Equity Secondaries" by CAIS. - "Navigating Secondaries: A Guide to Changing Currents" by Landmark Capital/Ares. - Look into case studies like BC Partners’ continuation fund for Springer Nature or Hellman & Friedman’s Fund VII continuation vehicle for practical examples.
If you’re preparing for the test, focus on building a robust waterfall model and understanding the nuances of GP/LP dynamics. Good luck!
Sources: Q&A: PE Secondaries Principal, Private Credit Secondaries Case Study Insight, Q&A: PE Secondaries Principal, Secondaries PE - Any insight on work and lifestyle?, Learning recs for secondaries
Which firm?
bump for any resources - not too sure on modeling examples so do point me in the right direction should anyone have any
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