IFDC Extra III Fund, a private equity fund raised $100 million towards the first close of its

fourth fund in
January 2017. The commitments have come from domestic institutional investors and a final close of
$300 million is expected by end of 2018. IFDC is looking at investing in 8-10 companies with a ticket size
of around $30-50 million.

IFDC makes the following projections regarding the investments and gains from this fund over the next
few years.

By end of year Drawdowns Cash flows from

investments
2017 63
2018 32
2019 30
2020 35 20
2021 35 80
2022 35 110
2023 120
2024 370

The fee and sharing arrangement it has with its limited partners is contracted as below.
a. Management fees @2% on committed capital during the investment period until all
committed capital was invested or 2 years after final closing, whichever is earlier; 1% of total
invested capital afterward.
b. Net investment income or loss, net realized gain or loss, and unrealized gain or loss on
investments are allocated to the limited partners pro rata in proportion to their respective
capital contributions; however, the allocation of profits and losses is divided between the
limited partners and the General Partner as follows:
• 100% to all partners until all the partners have received an amount equal to the capital
contributed
• 100% to limited partners until the limited partners have received an aggregate amount equal to
an 8% cumulative internal rate of return, compounded annually, on the outstanding balance of
the limited partners’ capital contributions
• 100% to the General Partner until the General Partner has received 20% of the aggregate
amount allocated to the general and limited partners pursuant to clause (II) above
• Thereafter, 80% to the limited partners and 20% to the General Partner.

Use the template provided to work out whether the fund’s expected performance will be able to match
the required compounded average annual return of 30% p.a. of IFDC’s limited partners by the end of
2024. What will be their cash-on-cash multiple over the life of the fund? What percentage of the total
distributions do the general partners receive under this arrangement?