The Guide to Private Equity Partnership

Accounting in Dynamo
The idea of this guide is to provide a general overview of how to use Dynamo for partnership accounting. This
guide was written with many years of implementation experience in the PE space. While we realize that
individual firms operate in a different way, we feel that these best practices capture the general concept of
the full fund life cycle, and can be used as a mechanism to help guide you through the process.

Please, use the following notions while reading through the guide:

- A step where Dynamo’s Calculation Engine is auto-calculating something in the background

– Designates a tip or a shortcut

Foreword:
The true partnership accounting process contains many steps that are performed outside of Dynamo – lawyer
selection, fund structuring, choosing a placement agent(s), determining investment strategy, preparation of
the LPA, etc. For the purposes of this guide, we will simply be focusing on the steps of the process which are
handled directly within Dynamo. At a high level, the chart below depicts each step in the process for which
Dynamo will be used. We’ll dive into the details of each step in chapters.

Assumptions/Prerequisites:
 Functionality, available fields, and layouts are shown for the Platinum user group
 At least one user must exist within this user group
Chapter 1:
Fund creation

Step 1 to partnership accounting in Dynamo is the creation of a fund entity. From the icon, simply
select the Fund entity type. Proceed to filling out all relevant information of the form. Please keep in mind
that all forms within Dynamo can be customized to incorporate any fields that are relevant.

The “Visible layouts” field allows you to show/hide certain Tabs within the Fund record and reduce clutter. E.g. if you do not
plan to show Portfolio or Fundraising data within the fund, keep these options unchecked. At a minimum have the following
options checked: Investor Balances, Investor Commitments, Investor Transactions, Mailing Preferences.

Upon clicking the icon, the Fund Profile tab will appear to fill out additional details about the fund.
Like all forms and layouts within Dynamo, this screen can be completely customized to track any additional
details that might be necessary.
Chapter 2:
Fund closings and investor commitments
Once the fund is created, investor commitments will need to be entered. To create investor commitments,
you must create an ownership record between the fund and the investor account. to the Commitments tab

within the fund. topCurrentthe icon ownership entity.

Fill out the form by choosing, at a minimum:

 As of date – the date of the commitment

 Owner – the Investor Account (investing entity)
 Ownership in – the Fund entity
 Currency

Commitment

Note that while the Ownership % can be filled out manually, it is recommended that the calculation engine is used to
calculate this. The calculation will be based on commitment amount per investor account as it compares to the total commitment of
the fund.

Next, click the button. Dynamo will automatically create relationships between the Investor
Account and Fund. The other field that will be important for future allocations within the ownership entity is
the ‘Partner role’ field. Standard choices include GP, LP, or SLP. In Chapter 4 of this guide, it will be described
how transactions can be allocated specifically to investor accounts with this partner role.
Chapter 3:
Transaction definitions
In order to properly utilize Dynamo for partnership accounting, each
transaction within the system must be set up correctly. The setup
of these transactions is done within the Transaction definitions
entity. The basic calculation of partner’s capital by the industry
standard definition is:

Beginning partner’s capital balance + Contributions - Distributions +

Operating income (loss) + Realized gain (loss) + Unrealized gain
(loss) = Ending partner’s capital balance

Dynamo gives the ability to define each transaction within one of

these partnership accounting “buckets”:

 Effect on contributions
 Effect on distributions
 Effect on operating income (loss)
 Effect on realized gain (loss) Folder where Transaction Definitions live

 Effect on unrealized gain (loss)

In addition to defining the bucket for which each transaction type falls into, there must also be an effect on
ending balance, also defined within the transaction definitions entity.

Other fields of note when setting up transaction definitions are:

 Effect on cash flow to investor  this field determines cash movement with specific transactions.
Anything other than ‘none’ will have an impact on performance (IRR, TWR, etc.).
 Effect on remaining commitment  this field determines if the specific transaction has as impact on
the investor’s remaining commitment amount. For example, a Capital call might decrease the
remaining commitment, where a Recallable distribution might increase it.
 Roll-up account  this field gives the ability to roll up certain transactions within a partnership
accounting bucket. It’s most commonly used to group income and expense transactions into their own
category, rather than leaving them all within the Operating income bucket.

Out of the box, our standard list of transactions are available, each pre-configured transaction definitions. To

edit any of these, simply highlight the transaction and choose ‘Edit’ from the tab.
Within the opened form, you will have the ability to make the appropriate changes.

In order to create new Transaction Types within DynamoOnce logged in as an administrator in the Admin
Console, the first step is to create a new lookup value in the Transaction Type dropdown. From within Entities
& FieldsLookups section add a new value to the Transaction Type lookup.

If this transaction type will be used as a ‘Summary transaction’, then repeat this step within the Lookup table
named ‘Summary Transaction Type’, using the exact same transaction name.

Once the new Transaction Type is published, you can then tie it into the Transaction Definition entity. Within
the Transaction Definitions view, the newly created transaction type will be available with blank definitions.
Fill them out accordingly depending on how the transaction should be configured.
Chapter 4:
Creation and allocation of transactions
Now that you have transactions in the system with defined definitions to the proper partnership accounting
buckets, you can now begin to create transactions within Dynamo. From the fund level, we use an entity type
called a ‘Summary Transaction’. Like the Transaction Type entity, we have pre-defined Summary Transaction
Type values that come standard. In the case that new Transaction Types need to be created and allocated at
the fund level, you’ll need:

1) Add the new type to the Transaction Type lookup (see how in the prior section)
2) Then add the new value to the Summary Transaction Type lookup. Make sure that it matches exactly
the Transaction Type lookup added in Step 1.

From within the tab in the fund entity, there are three main panels:

 Fund Transactions – displays a list of all summary transactions related to the fund
 Investor Transactions – displays a list of all individual transactions related to the fund, which are a
result of summary transactions
 Partner Allocations – displays all partner allocations related to the fund

The purpose of a Summary Transaction is create one transaction at the fund level, and to have the amount of
the transaction flow down to each investor of the fund with a pre-defined allocation percentage. The
ownership % that the Investor Account has into the Fund is the same percentage that is used by default to
allocate the Summary Transaction to individual investors.

To create a Summary Transaction, from within Fund Transactions panel, click the button and
choose ‘Summary Transaction’.
This will launch a new form, with the current fund name pre-populated. You will be expected to choose the
Summary transaction type, the Effective date, and either the exact Amount or Percent of the transaction that
you’d like to create.

When clicking , the Transaction Summary tab will open up, which is broken into two panels:

 Details
 Breakdown by partner

In the Details panel, the fields that we will focus on are:

 Partner role selection  this field allows you to choose who specifically will be allocated a portion of
this transaction. Chapter 2 describes how their role is determined in relation to the fund. Choosing
‘GP only’ will allocate the entire transaction to all investors with a role of ‘GP’. Choosing ‘LP only’ will
allocate the entire transaction to all investors with a role of ‘LP’. Choosing ‘SLP only’ will allocate the
entire transaction to all investors with a role of ‘SLP’. Choosing ‘The selected only’ contains one
additional step, which we will get to a little bit later on.
  Allocation method  this field allows you to choose the method for which to allocate the transaction
across the chosen investors. The most common allocation methods are:
o Total commitment – reads from ownership % table and allocates accordingly based on the total
transaction amount as well as which investors are part of the transaction. This is also known as
the ‘Pro-rata’ allocation method.
o Equal amounts – takes the transaction amount and splits it evenly across all investors.
o Custom partner allocation – if this method is chosen, then you must select a ‘Custom partner
allocation’ entity for the transaction. We’ll get to this entity later in this chapter.
 Custom partner allocation  this field is only relevant when the ‘Custom partner allocation’ method is
chosen.

You can also specify:

a) “Underlying Investment” – you can link this Summary Transaction to an Investment you have made for
reporting and tracking purposes.
b) “Rounding” – if you leave blank, it will round to the penny, “0.1” to the dime, and “1” would round to
the nearest dollar.
c) “Due date” – this will fill in the “Due date” field on all of the newly created transactions (useful when
doing Mail-merges)
d) “Notes” – will fill in the “Notes” field on all of the newly created transactions.

Once these fields are selected, click the button, which will kick off Dynamo’s calculation engine.

As the calculation engine is running, a status bar will appear next to the start button:

Once completed, individual investor transactions will be created in the ‘Breakdown by partner’ tab, and these
transactions will be automatically related through to the Summary Transaction, which will act as the parent.

Note: You can recalculate a Summary Transaction as many times as you would like – Dynamo deletes and recreates any
resulting transactions based on the latest parameters you have set in the Transaction Summary fields.
Going back to the ‘Transactions’ tab at the fund level, you can see both the Summary Transaction and
individual Investor Transactions.

Take advantage of Dynamo’s ‘Group By Box’, located in ‘View Options’ for easy filtering and grouping of the data. The
most relevant groupings would be by Effective date, Investing entity, and Transaction Type, or a combination of these.

Special Allocation Methods

In addition to allocating transactions based on commitment and partner role, there may be the need to
manually define the allocation method. This can be accomplished through the ‘Partner Allocation’ entity.

Staying within the fund entity, this panel is available within the Transactions tabl. Simply click the
button to launch the New Partner Allocation form. Here, you can name the allocation and select an as of date.

Clicking on will open the allocation. Once opened, the current investor accounts, their
commitments, and their ownership percentage, will be displayed. The remaining column, labeled ‘Partner
allocation %’, is editable and will be the input to define the custom allocations.
Once the allocations are confirmed, clicking the will sum the values. The ‘Total Allocations %’ field
MUST equal 100.0000% in order for transactions to be booked properly.

To book a summary transaction using this allocation, repeat the steps to create a new summary transaction.
After the step, modify the ‘Allocation method’ field to read ‘Custom partner allocation’. Once
done, then in the next field search for the name of the Partner Allocation that was previously created. Again,
click on the button to get the transaction generated. The Amount of the transaction will be allocated
accordingly. Any Investor Accounts who were allocated 0% within the allocation will not get an individual
transaction generated for them.

Mailing Notice
The next transaction type to discuss is the ‘Mailing Notice’ transaction. This transaction is meant to aggregate
existing Summary Transactions for the purposes of sending out a notice to investors, while maintaining the
originally used allocation methods. Creating a Mailing Notice is done in a way similar to creating a new
Summary Transaction, simply by clicking on the button and choosing ‘Mailing Notice’.

Once selected, a new form will be generated where you will enter the Effective date of the Mailing Notice.
The Fund and Transaction type will automatically populate.

Next, click for the Mailing Notice Details tab to open. On the left panel, a list of all Summary
transactions related to the fund will be displayed. See box labeled ‘1’ from screenshot below. In order to
apply those transactions to the Mailing Notice, use the arrows to bring the Summary transactions to the right
panel. In addition to bringing these transactions over, there is a field called ‘Mailing Notice Effect’. Here,
you’ll be able to define how the transaction is applied. See box labeled ‘2’ from screenshot below.

For example, in the case of a Capital Call Mailing Notice, if you to bring over a call for investment, a
management fee, and any additional expenses, all of these effects would be set to ‘Add’. The reason is that
you would want to add all of the Summary transaction amounts to get a total of what each investor owes.

In the case of a Capital Call Mailing Notice that should be netted against an income or distribution transaction,
the effects will be modified. For example, if you bring over a call for investment, a management fee, and then
have a distribution (that is less than the call), then the effect on the distribution would be set to ‘Subtract’.
The reason is that you would want each investor to pay the net amount of the call and fees minus the
distribution that is being sent. This will save you from having to send out two separate notices.

On the bottom panel, Dynamo summarizes the transactions that are used for the Mailing Notice. See box
labeled ‘3’ from screenshot below.
The second tab, names Breakdown by Partner, is broken into two panels. The top panel lists all individual
investor account transactions that are part of the Mailing Notice. The bottom panel lists each investor
account, along with the corresponding summary transactions, and displays the allocation amount for each. Up
to 15 summary transactions can be linked to a single Mailing Notice.

Transfer of Interest
The last transaction type to discuss is ‘Transfer of interest’. When a specific investor account wants to transfer
all or a portion of their interest in a specific fund to a new or existing investor account, a ‘Transfer of interest’

summary transaction will need to be used. Within the Fund Transactions panel, choose , and select
the Summary transactions type ‘Transfer of interest’.

Enter the effective date, and select . From here, you will need to choose who is transferring out of
the fund (Transfer from field), and who is transferring into the fund (Transfer to field). Note that you can
transfer to multiple investor accounts within the same summary transaction if you choose to do so.

For this example, ‘800 Capital Trust Account’ will transfer 100% to ‘ACME Equities Pool’. Clicking on the
button at the ‘Recalculate’ field will begin the process.

Once the calculation is completed, this screen will display the following results:

 The roles of the investor accounts will change to ‘Transferor’ (800 Capital Trust Account) and
‘Transferee’ (ACME Equities Pool).
 The commitments will get updated so that ACME Equities Pool inherits 800 Capital Trust Account’s
100% commitment amount as of the transfer date.
 The Transferor and Transferee transactional balances will be updated accordingly so that all
contributions and NAV is properly moved from the old investor account to the new one.
Lastly, if we go back to the fund’s Commitment tab, the transfer changes will be reflected here as well. In the
‘Current’ panel, ‘800 Capital Trust Account’ is no longer here. Also, ‘ACME Equities Pool’ will show the new
commitment amount. In the ‘Past’ panel, both investor account’s previous commitment amounts, along with
the ‘Valid to’ date, which is the date of the transfer, are reflected.

Chapter 5:
Investor correspondence and reporting
Once transactions are booked within Dynamo, you can send notifications to your investors either via email or
the integrated Dynamo Investor Portal.

Sending Notices Via E-mail -> Use Dynamo Mail-Merge:

These mailings can be based on specific transactions, such as Capital Calls, Distributions, or Mailing Notices.
To send these out, Dynamo has a built-in utility, which can be downloaded from ‘My Settings’. The Mail
Merge utility is an extremely powerful tool which allows for sending personalized letters to your investors.
From within the tool, you can decide who receives the letters, create the content, define the merge fields, and
ultimately send it out for distribution. The tool will also log all correspondence as an activity, allow for
attachments (both personal and generic), and track read receipts. For more information about the Mail
Merge tool, visit the ‘Help Page’ and search for “Mail Merge”.

In addition to our Mail Merge tool, investor correspondence via our Investor portal. Here, you can post the
same personalized documents based off of transactions already in Dynamo, and also give your investors
transparency into your fund financials to view detailed fund and account information. The portal is branded
to your specific needs, and accessible 24/7 for your investors. To learn more about our investor portal, please
contact a Netage sales representative.

From a dynamic reporting perspective, the Fund > Investor Account panel is set up to display an on-screen live
partner’s capital report. The panel displays investor accounts, their original commitment, their ownership %
into the fund, their remaining commitment, all contributions to date, all distributions to date, all transactions
that hit operating income (loss), all transactions that hit realized gain (loss), all transactions that hit unrealized
gain (loss), and ultimately each investor’s account balance.

From a core reporting perspective, we have a fund level partner’s capital statement that can be run for a
specific time period to display the same data:
At an individual investor level, we have a schedule of partner’s capital statement that can also be run for a
specific time period:
This Schedule of Partner’s Capital report can be run two different ways. The traditional method is simply to
run the report from within an entity, in this case the fund. In addition, a separate Capital Account Statement
tab is available from within the fund entity, which will allow you to generate and save the report in one step.
To do this, go to the Cap Account Statement tab, and enter the following fields:

Cap Statement From  the beginning period of the statement

Cap Statement To  the ending period of the statement

Cap Statement Document Categories  choose ‘Capital account balance’

Generate Cap Statements  click the ‘Start’ button once these parameters have been set

After clicking the start button, the statements will automatically be generated for the appropriate time period
for all investor accounts in the fund. Clicking on an individual document will provide a preview of the actual
statement as well for ease of reconciliation.
There are 2 methods of distribution:

1. Publish via the portal. To do this, simply highlight all of the relevant documents, and choose . From
within the mass edit screen, change the ‘Document status’ field to ‘Approved for portal’.

2. Mail out via the Mail Merge Utility. There is a specific mail merge circulation called ‘Investor Accounts
by Fund, by Mailing Preferences. Use this circulation in combination with the Smart Attachment
feature to read documents directly from within Dynamo.

For more information about the Mail Merge tool, visit the ‘Help Page’ and search for “Mail Merge”.
Addendum 1:
Best practices
1. Have the entire team use the system – Using Dynamo as a hobby will not produce optimal results. All
users must buy into the application and store all of their data within it. This will centralize all of your
data and give you the ability to track everything in one place, which is critical for reporting. This
reporting is exactly what executives will want to see, and having it all in Dynamo will ensure minimal
effort and decrease risk producing it vs. aggregating data from within multiple systems.
2. Entity creation – It’s important to fill out as much data as necessary in a given entity. This will benefit
you and the team later, as all fields are searchable and views can be created off of them. Dynamo
gives you the ability to classify certain fields as required to ensure that data is entered prior to the
entity being created.
3. Slicing and dicing data – data in the system is real and extremely valuable. Internal folks all want
access to the data, but perhaps in different ways. Take advantage of setting up different user groups
with default views on how the data appears so that Dynamo usage can be optimized within your
organization.
4. Reporting – Use our core reports! They were designed for fund managers to see data in a way that
makes sense in the industry. Many reports were created with the help of existing clients, so the
formatting was well thought out. The core reports can be modified to follow your standard formatting
and content if needed.