intro chap1

Question 1

2 characteristics of PE

Answer 1

closed-end limited partnerships /“blind pool” vehicles

Question 1

PE def

Answer 1

inv pool their capital in a fund to buy equity stacks from private companies

Question 2

PE firm has two separate comp:

Answer 2

General Partner /Investment Manager

Question 3

PE firm legal distinction with GP and inv manager :
T or F

Answer 3

true

Question 4

Passive Investors?

Answer 4

they do not play an active role in the day-to-day operations or management of the private equity fund

Question 5

Limited Liability ?

Answer 5

protects them from personal financial exposure beyond their investment.

Question 6

A pension fund

Answer 6

provides retirement income.

Question 7

which issue capital calls for LPs ?

Answer 7

GP

Question 8

impact future fundraising

Answer 8

LPs

Question 8

PE firm’s investment committee (IC),

Answer 8

A fund of PE funds

Question 9

impact future dealmaking

Answer 9

portf comp

Question 10

specific purpose vehicles

Answer 10

these SPVs serve as the GP for
only one fund to avoid cross-liabilities between related funds of the PE firm

Question 11

hard cap

Answer 11

target fund
size from the outset

Question 12

A fund holding
its first closing in 2016 is referred to as a

Answer 12

vintage 2016 fund

Question 13

draws down

Answer 13

call

Question 14

A fund’s uninvested committed capital is referred to as

Answer 14

dry powder

Question 15

holding period … in the case of under-performing firms

Answer 15

longer

Question 16

a fund’s GP works closely with portfolio companies’ management teams to
create value and prepare the company for exit . during which phase ?

Answer 16

holding period

Question 17

holding period length

Answer 17

3 to 7 y

Question 18

Investment Period length

Answer 18

4 to 5 y

Question 19

Fundraising

Answer 19

12 to 18 months

Question 20

quick flip

Answer 20

where an exit was achieved within 13–18 months of investing during the investment period / can reinv

Question 21

net cash flow position

Answer 21

the total capital
invested along with fees paid to the PE firm minus the capital returned to the LP by
the GP

Question 22

lowest point of a J-curve
is theoretically defined as

Answer 22

the fund’s total committed capital

Question 23

The secondaries market nowadays offers
a realistic avenue to

Answer 23

add liquidity, shorten the J-curve and manage a PE portfolio
proactively.

Question 24

As soon as the J-curve crosses the x-axis,

Answer 24

the fund has reached breakeven;

Question 25

the final point on the J-curve represents

Answer 25

an LP’s total
net profit generated by the fund.

Question 26

“2%”

Answer 26

refers to the management fee, which is an annual fee paid by Limited Partners (LPs) to the fund’s investment manager.

Question 27

“20%”

Answer 27

represents the carried interest, also known as “carry.” This is a performance fee paid to the General Partner (GP) of the fund.

Question 28

80%

Answer 28

generated by the fund is distributed pro rata to the fund’s Limited Partners.

Question 29

2%) of

Answer 29

the total committed capital

Question 30

20%) of the

Answer 30

net profits generated by the fund.

Question 31

The net return,

Answer 31

which is the return on capital generated by the fund net of management fees and carried interest

Question 32

first-time funds will charge … management fees

Answer 32

higher

Question 33

Management fees accrue from … and are usually paid ….

Answer 33

a fund’s first closing onwards / either quarterly or semi-annually in advance.

Question 34

Management fees are charged on .. during the investment period,

Answer 34

committed capital

Question 35

Management fees are charged on … after the
investment period

Answer 35

net invested capital

Question 36

An investment manager may charge additional fees to the fund, particularly
in the context of a …

Answer 36

control buyout.

Question 37

monitoring fees for
advisory and consulting services provided to portfolio companies during the ..

Answer 37

holding period.

Question 38

PE Fund Distribution Waterfall

Answer 38

1- Return of Invested Capital
2- Preferred Return or Hurdle Rate
3- Catch-Up Mechanism
4- split
5- Clawback Provision

Question 39

Deal-by-Deal Carry

Answer 39

the GP receives carried interest only after investors have received:
Their invested capital from the specific deal in question.
A preferred return on the overall capital contributed.
A “make whole” payment to compensate for any losses incurred on prior deals.

Question 40

All capital first

Answer 40

European-style waterfall