Hi All,
I've been asked, as part of an interview test, to comprise a 3 tier equity waterfall model. Not a problem generally. Except in this test the interviewer has asked me to structure the promotes through a mix of BOTH EM and IRR. For example; Hurdle 1 = 12% IRR with 10% profit share (initial investment for GP) Hurdle 2 = The higher of 14% IRR or 1.6x EM with 30% promote (I presume by 'higher of' they mean whichever provides the most promote, but not certain of this). Everything after is split 50/50.
Has anyone encountered mixed metrics in the same waterfall before, is this normal? I'm far from an expert on the JV side of things but I can't find anything online in terms of this and my waterfall model doesn't cater for it, so not really sure on how to go about tackling it.
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