Question #2 As a member of the investment team for the Drew University Endowment, you have...

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Question #2 As a member of the investment team for the Drew University Endowment, you have been asked to evaluate the performance of the Granite Venture Partners (GVP) Fund I (vintage 2019) private equity fund. Granite was established to provide later stage equity financing for cutting edge technology firms. The GP targets investment in portfolio companies between $2 million and $10 million. Table 1 - Fund Statistics. Fund GVPI Vintage 2018 Committed Capital 125 Capital Called 92% 2% Mgmt Fees Perf. Fee Hurdle 20% Term 8% 2029 2018 % Called (Cumulative) Annual Paid-In 40% 2019 52% Table 2. Fund Cash Flows 2020 60% 2021 80% 2022 88% 2023 92% Operating Performance $ (5.00) $ (15.00) $ 25.00 $ 45.00 $ 55.00 $ 105.00 Annual Mgmt. Fee NAV Pre Distribution Annual Performance Fee Annual Distributions $ NAV Post Distribution Annual Net Cash Flow $ 25.00 $ 45.00 $ 75.00 GVP receives carried interest (performance fees) only after the fund has returned the entire committed capital to LPs. Management fees are calculated annually on the basis of paid in capital (i.e. treated like a front-end load). a) Based on the Cumulative Percentage of Capital Called (%Called) in Table 2, calculate the Fund's Annual Paid-In Capital. (1pt) b) Based on the Annual Paid-In Capital you calculated in part a), calculate the Fund's annual management fees and annual predistribution NAV. (2pt) (Note, in a Private Equity Fund, the Performance fee paid to the manager is considered a distribution). c) Calculate the Fund's annual Performance Fee (carried interest). [2pt] d) Calculate the post distribution NAV of the Fund. (2pt] e) As of the end of 2023, calculate the following performance metrics for the Fund: (3pt) Hint: Your residual value is the Fund's post distribution NAV DVPI RVPI TVPI f) From the perspective of investors, calculate the annual net cash flow to investors and the Fund's IRR as of the end of 2023. (2pt) IRR g) As of the end of 2023, would you say Drew's investmentment in the GVP I Fund has been positive or negative? Why? [1pt) Question #2 As a member of the investment team for the Drew University Endowment, you have been asked to evaluate the performance of the Granite Venture Partners (GVP) Fund I (vintage 2019) private equity fund. Granite was established to provide later stage equity financing for cutting edge technology firms. The GP targets investment in portfolio companies between $2 million and $10 million. Table 1 - Fund Statistics. Fund GVPI Vintage 2018 Committed Capital 125 Capital Called 92% 2% Mgmt Fees Perf. Fee Hurdle 20% Term 8% 2029 2018 % Called (Cumulative) Annual Paid-In 40% 2019 52% Table 2. Fund Cash Flows 2020 60% 2021 80% 2022 88% 2023 92% Operating Performance $ (5.00) $ (15.00) $ 25.00 $ 45.00 $ 55.00 $ 105.00 Annual Mgmt. Fee NAV Pre Distribution Annual Performance Fee Annual Distributions $ NAV Post Distribution Annual Net Cash Flow $ 25.00 $ 45.00 $ 75.00 GVP receives carried interest (performance fees) only after the fund has returned the entire committed capital to LPs. Management fees are calculated annually on the basis of paid in capital (i.e. treated like a front-end load). a) Based on the Cumulative Percentage of Capital Called (%Called) in Table 2, calculate the Fund's Annual Paid-In Capital. (1pt) b) Based on the Annual Paid-In Capital you calculated in part a), calculate the Fund's annual management fees and annual predistribution NAV. (2pt) (Note, in a Private Equity Fund, the Performance fee paid to the manager is considered a distribution). c) Calculate the Fund's annual Performance Fee (carried interest). [2pt] d) Calculate the post distribution NAV of the Fund. (2pt] e) As of the end of 2023, calculate the following performance metrics for the Fund: (3pt) Hint: Your residual value is the Fund's post distribution NAV DVPI RVPI TVPI f) From the perspective of investors, calculate the annual net cash flow to investors and the Fund's IRR as of the end of 2023. (2pt) IRR g) As of the end of 2023, would you say Drew's investmentment in the GVP I Fund has been positive or negative? Why? [1pt)