Question.2574 - Fund Return Calculation This is an individual assignment where you will be given a problem: you will be requested to calculate the expected return on a venture fund given specific parameters and assumptions. The deliverable is an excel sheet model and a 1-2 page document with the description of your analysis. Assumptions The management fee is calculated on total committed capital, not remaining capital. 2.5% annual management fee, with decreasing amount after 7 years: 7th = 2.25% 8th =2% 9th =1.75% 10th=1.5% Fund expenses: include legal, accounting and back-office, audit, taxes, diligence expenses. For a 10M fund, Legal = 20K/year Back Office= 40K/year Audit = 25K/year Taxes = 1K/year Diligence Expenses = 14K/year Waterfall: Up to 3x, 80/20 >3x and <6x, 75/25 6x+, 70/30 Construct a portfolio and financial model to find a scenario for a FUND SIZE: $50M Target # of portfolio companies: 30 WHERE: LP gets 3x return for his/her committed capital (ignore GP 1%)
Answer Below:
Fund xxxxxx Calculation xxxxxxxx The xxxxxxxxx I xxxxx for xxx companies xxx my xxxxxxxx were xx follows xx be xxxx to xxxxxxx a xxxxxx X xxxxxx for xxx LP xxxxx deductions xxxxxxxxx are xxxxxxx that xx they xxx able xx generate xxxxxxx get xxxxxxx companies xxx breakeven xxxxx no xxxxxx or xx loss xxxxx companies xxx loss xxxxxx With xxxxx chosen xxxxxxxxx for xxx returns xx the xxxxxxxxx companies xxxxxx for xxxxxxxxx I xxx a xxxxx of x For xxxx the xxxxx management xxxx for xxx -year xxxxxx with x reducing xxxxxxxxxx fee xxxx year xx year xxxx this xxxxxxxxxxxx management xxx calculation x got x total xx for xxx years xxxxx I xxxxxx at xxx calculation xx total xxxxx of xxxxxxxxx one xxxxx I xxxxxxx was xxxxx a x dollar xxxx model xxx the xxxx so xx get xxx right xxxxxx of xxxxxxxxxxxx costs xxx the xxxxx for xxx M xxxx I xxxxxxxxxxx had xx get xxxx year x costs xx multiples xx M xxx the xxxx would xx the xxxxx for xxx year xxxxxxxxxx by xxx years xxxx this xxxxx I xxx a xxxxx expense xx for xxx years xxx a xxx of xxx the xxxxxxxx for xxx years x summed x total xx for xxx years xxx management xxxx together xxxx a xxxxx expense xx for xxx years xx get x total xxxxxxx s xxxxxxx at xxxxx getting xxx the xxxxxxxxxxxx out xx the xxx now x need xx get xxx average xxxxxx for xx which xxxxxx be x the xxxx invested xxx I xxx able xx get xxx total xxxxxx minus xxx total xxxxxxx s xxxxxxx for xxx the xxxxxxxxx The xxxxxxxxxxx included xxxxx income xxx the xxxxx for xxx company x minus x total xxxxxxx s xxxxxxx at xx get x final xxxxxx of xxx total xxxx is xxx LP xxx the xxxxxxxxx a xxxxxx of x on xxxx invested xxxx earn x ratio xx profits xxxxx the xxxxxx ratio xx less xxxx so xxx get x ratio xx LP xxxx therefore xxxMore Articles From Finance
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