Limited partners try to get a better understanding of the distributions for the fund they invested in.
Question:
Limited partners try to get a better understanding of the distributions for the fund they invested in. Assume that they contributed $200 million in the first year to fund an investment and that the investment is sold by the fund in the second year for $400 million. The fund has an 8% hurdle rate, a 100% catch-up and an 80/20 carried interest split. What is the total amount of compensation for the general partner of the fund?
- A. $40 million
- B. $36 million
- C. $160 million
Then, using the example above, what is the total amount of compensation for the general partner of the fund if the investment is sold by the fund in the second year for $219 million?
- A. $0.6 million
- B. $15 million
- C. $3 million
Auditing Cases An Interactive Learning Approach
ISBN: 978-0132423502
4th Edition
Authors: Steven M Glover, Douglas F Prawitt