Accounting for Funds: Private Equity

In this course we explore private equity funds as an alternative asset class. We look at key concepts about fund formation, fund economics (i.e. how funds make money), key participants in fund activities, and the financial reporting process. Also, we pay close attention to how management and performance fees are calculated, as well as NAV.

Furthermore, we use an example of EducAfrica Asset Management (fictitious private equity firm), to show the typical fund structures, main actors in the fund organization and operation, deal sourcing process, underwriting approach, and general deal flow. Nonetheless, a great portion of the course is dedicated to explaining key journal entries and how they impact the financial statements.

Below follows the course outline:

1. Funds key concepts (i.e. private equity, hedge fund)

2. Difference between a private equity and a hedge fund

3. How private equity funds are set-up (stand alone fund, master-feeder, parallel, etc.)

4. Legal entities and preferable jurisdictions

5. Team members and service providers (management, advisory board, attorneys, accountants, fund administrator, custodian, etc.)

6. Key accounting concepts (statement of assets and liabilities, statement of activities, schedule of investments, members/partners equity)

7. Capital activities (capital call ad redemptions)

8. Operating expense schedule

9. Management and performance fees calculation

10. Net asset value calculation

At the end of this course, students should be able to comprehend the process of private equity formation, their economics and operations, as well as financial reporting for this asset class.