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A VC firm is considering two different structures for its new $300M fund. Both structures would have management fees of 2.5 percent per year (on committed capital) for all 12 years. Under Structure I, the fund would receive a 25 percent carry with a basis of all committed capital. Under Structure II, the fund would receive a 20 percent carry with a basis of all investment capital. Problems (a) Suppose that total exit proceeds from all investments are $150M over the entire life of the fund. How much carried interest would be earned under each of these two structures? (b) For what amount of exit proceeds would these two structures yield the same amount of carried interest?

Financial Management, Finance

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