Accounting for Funds: Private Equity

Define a fund as a pool of investors' money investing in a strategy. Seek superior return with risk of loss and professional management including private equity, hedge funds, and alternatives.

Explore how VC, private equity, and hedge funds differ in strategy, stage focus, and horizons—from VC's early-stage bets to PE's buyouts and hedge funds' short-term stock and derivative trading.

We compare private equity funds with hedge funds, highlighting private equity's long horizons, buying privately held businesses in the lower middle market, and using leverage to drive growth.

Compare private equity and hedge funds, noting private equity's mid to long-term investments in privately held companies and hedge funds' short-term trading of public securities, formed via limited partnerships.

Explore fund structures, key market participants, and service providers in private equity, and learn how investor relations deliver value in the alternative asset space.

Explore the typical legal structures for private equity funds, including llcs and lps, and navigate onshore versus offshore jurisdictions, master feeder models, and special purpose vehicles.

Learn to identify essential private equity fund documents—LPA, term sheet, SIM, PPM, and subscription agreement—and how they define investor roles, fund economics, and fee structures.

Examine a typical private equity fund structure with GP, LP, investment manager, 2% management fee, 20% carried interest, and master feeder setups across Delaware and Cayman Islands entities.

Identify fund participants, from sponsor and gp to board of advisors, and outline service providers like custodians, fund administrators, auditors, tax accountants, and legal counsel for private equity.

The fund raises capital from accredited and institutional investors for private equity and other alternative assets, with qualified buyers eligible; accreditation relies on income, net worth, or Series 7/65 licenses.

Understand fund regulators, from state administrators to the SEC, FINRA, and the CFTC, and how asset size dictates registration choices between state regulators and federal regulators.

Explore fund organization, structures, and jurisdictions like Cayman Islands, Mauritius, Virgin Islands, and Panama. Identify accredited and institutional investors and regulators before previewing the financial statements and private equity accounting.

Explore how the accounting process for private equity funds affects financial statements and reports, detailing entries and their impact for fund managers and investors.

Clarifies private equity fund accounting basics, detailing committed capital, capital calls and contributions, and the 2% management fee, 20% carried interest, hurdle rate, and catch-up mechanics.

Discover the key financial statements used in private equity fund accounting, including the statement of assets and liabilities, SOP, and the schedule of investments.

Examine a sample private equity fund’s capital commitments and the first capital call. It details GP and LP contributions, the two by twenty structure, and early NAV updates.

Explain the first capital call in a private equity fund and how capital commitments, contributions receivable, cash, and GP/LP capital accounts impact the statement of assets and liabilities.

Explore recording operating expenses for a private equity fund, including legal and fund admin fees, organization costs, aml and compliance, directors fees, and pitchbook deal-sourcing entries.

Learn how a private equity fund funds a 20 million, 5-year, 15% senior loan to a Rwanda university via a capital call, recording LP and GP contributions and ledger entries.

Record the first loan payment from a five-year, 15% loan, update the investment ledger, and initialize NAV and fee calculations for a private equity fund.

Explain how management fees are calculated from contributed capital and capital called to date, and how performance fees depend on hurdle rate and high watermark, affecting NAV and net performance.

The lecture covers capital call #03 and NAV calculation, noting management fees and net performance, then demonstrates funding the remaining committed capital to support new deals and eventual redemptions.

Update fund financials by recording opex and income entries for two months, adjust management fees, and reflect nav, equity allocations, and performance fees in the pnl.

We analyze the acquisition of Yeto Institute, outlining 50/50 equity and debt financing for a $20 million purchase and its impact on cash, fair market value, and the loan schedule.

Update July and August financials, record OpEx, and book loan, interest, and dividend income for the private equity deal, including NAV per share considerations for investors.

Invest $15 million for a 30% stake in EduTech Corp, a growth-oriented Angolan education company, with an option to convert and a plan to go public on the Angolan exchange.

Track the September nav update for a private equity fund, noting rolled-over transactions, income and expenses, and allocations that lift net performance and nav per unit.

Execute a private equity exit scenario using a 2.3x multiple on a 20 million acquisition, yielding 46 million cash, repaying 9.5 million debt, and realizing a 26 million gain.

This lecture demonstrates a $25 million capital redemption distribution to investors, showing how return of capital precedes PnL and affects cash, NAV, and balance sheets, with hands-on ledger steps.

Update ending redemption and pal allocations, adjust performance and management fees, and reconcile nav with allocations for accurate fund accounting.

Explore the private equity fund life cycle, from capital calls and investing to exit and returning capital, with attention to fund structure, participants, regulators, and financial statements.

Examine the workbook setup for a private equity fund, including the chart of accounts, general ledger, and nav package, and understand how investments and capital flow to the balance sheet.

Review the allocation process within private equity fund accounting, detailing how management and performance fees are calculated against committed capital, NAV, hurdle rate, and high watermark for each investor.

Discover how to find financial statements for publicly traded private equity firms by using investor relations pages to access ten-k and ten-q filings, balance sheets, and statements of operations.

Explore the updated private equity workbook, including chart of accounts, GL entries, monthly SOPs, balance sheet tracking, and NAV with management and performance fees.

Explain how a $50 million capital commitment and a $1 million capital call impact the balance sheet, cash, and capital contribution receivable, with GP/LP allocations and NAV changes.