Member-only story
The fundamental plumbing in Private Equity
This short essay reflects an attempt to offer a clear, synthetic and critical perspective on key questions asked as investor in the private equity industry.
The perspective addresses subjects from value levers investment managers actuate to the topics in being considered in a due diligence process before moving ahead and invest.
The read is structured around six key questions, aimed to provide the answers to fundamental topics appearing the investment process and providing corporate governance challenges inherent hereto.
Q1: What are the main KPIs to reflect performance? What is the difference between the net and the gross performance of a private equity fund due to?
The difference can largely be attributed to three components: (a) management fees, (b) fund expenses and (c) carried interest (‘carry’). These three cost components cited before are charged to the final investor (LP) and are deducted from the returns of the underlying investment(s). The returns of the underlying investment(s) are referred to as the gross return. The…
