Asset Management Company – Closed End Fund Model

Asset Management Company – Closed End Fund Model Description

The Asset Management Company – Closed End Fund Model offers a comprehensive financial analysis of closed-end funds, including management fees, carried interest, investment assumptions, and fund cash flows. It calculates IRR, MOIC, TVPI, and portfolio NAV, along with investor distributions and performance metrics.

Financial Model presenting a scenario of a Closed-End Fund managed by an Asset Management Company. Closed-End Funds have a fixed maturity and a fixed amount of money to invest. Since Closed-End Funds have a fixed length, investors can invest in the beginning and receive their profits at the end of the fund.

In closed-end funds, there is an interaction between the investors and the AMC. Investors will be paid, and a gain or loss will be generated at the end of the fund (typically 10 years with a maximum extension of 3 years.).

The Asset Management Company (AMC) receives two different kinds of remunerations during the lifetime of the Investment: Management Fees and Carried Interest.

Management fees correspond to the amount of money an AMC receives every year from closed-end funds. The management fee is a fixed percentage of money calculated on the value of the closed-end fund at the beginning of the fund itself.

The second source of remuneration for the AMC is made up of the carried interest, and it is computed only at the end of the closed-end fund’s life cycle. The carried interest is the spread between the final IRR and a hurdle (a.k.a. threshold) IRR multiplied by a fixed percentage. Usually, the fixed percentage ranges between 25-30%; the hurdle rate ranges between 7-8%. This means that, at the end of the fund, the AMC will receive a carried interest only if the final IRR is larger than 7-8%.

Model Structure

This Financial model analyzes a Closed-End Fund and includes assumptions of Fund Life, Total Fund Size, Investment Period, Capital Drawdown, Dividends and Exit Multiple, Debt, Fund Expenses & Fees, Investors Share (LPs and GPs), Hurdle Rate, Carried Interest, and Catchup.

It calculates Fund Cash Flows, including analysis of Portfolio Investments and Returns per Investment, Investors (LPs) and Managers (GPs) Cash Flows and Returns and a Fund Summary presenting the Fund’s key metrics and returns.

Inputs:

• General Business Info & Reporting Metrics
• Fund Terms (Fund Size, Equity & Debt Assumptions, Fund Length, Extension Periods, Investment Periods)
• Fund Fees & Expenses (Set up Expenses, Management Fees, Administrative Expenses, Transaction Fees)
• Investments Assumptions (Capital Drawdown per Year, Dividends, Exit Multiple)
• Investors Assumptions (LPs and GPs Equity Share, Hurdle Rate, Carried Interest, GP Catch Up, After/Before Principal Catch up Calculation)
• LPs Assumptions (equity contribution for 4 different investors)

Outputs:

• Fund Cash Flows, including analysis per Investment, Debt Schedule, Fund Fees & Expenses, Gross & Net Fund Returns (IRR, MOIC, TVPI, DPI), and Portfolio NAV
• Partnership Returns Waterfall analyzing the distribution between LPs and GPs, including calculation of GP Catch up (Before or After Principal) and Carried Interest.
• Investors (LPs) Cash Flows analyzing Contributions, Distributions, Profit, Pre and Post Catchup, and Carry Returns (IRR, MOIC)
• Executive Summary presenting overall Closed-End Fund performance

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