Administration of private equity funds - Carried interests

Alternative investment funds remunerate their investment managers with a share of realised gain on their private equity investments on the basis of a required performance benchmark. Carried interest (partnership allocation) is considered as a tool to align the interests of both investors and investment managers.

Calculation methods are driven by private agreements and some clauses or special considerations are unique to each fund, it is essential to understand the pitfalls and issues linked to its measurement.

PwC’s Academy is pleased to offer a training workshop dedicated to understanding the principles of carried interest calculation and to provide the opportunity to go through exercises and analysis of the most commonly used models.

By the end of this training, the participants will be able to:

• distinguish and understand the different methods/models of carried interest calculation;
• use classic carried interest schemes model in Excel;
• identify the potential issues and monitor the risks linked to specific clauses in the carried interest specifications;
• perform validation checks on carried interest calculation.

1. Definition of main carried interest concepts and structure:

• Principles of waterfall allocation
• Hurdle rate and IRR calculation
• Determination of preferred return and catch-up

2. Modelling of carried interest waterfalls based on real life example

3. Description of usual specific clauses and their calculation impact:

• Deal-by-deal models
• Claw-back and escrow clause
• Variable hurdle and catch-up rates

An attendance certificate will be sent to participants.

Nicolas Payet, Partner at Pwc Luxembourg, has been with PwC for more than 16 years, building knowledge in the alternative investments industry ("ALT"). He is an active member of our integrated alternative investments department and the leader of our private debt funds group.

Nicolas has also developed his skills in the alternative assets management practice of the PwC New York office during a 2 years tour in the U.S.A., serving one of the top American banks’ PE line of business. He is also leading our internal and external training programme for the ALT practice at PwC and he dedicates part of his time to train our clients and other actors of the industry.