Private Equity (Venture Capital) Fund Financial Model

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This is a professional financial model of a private equity or venture capital fund. The model incorporates all industry standards of private equity and investment banking and has been developed to comply with European Private Equity and Venture Capital Association (EVCA) guidelines and Global Investment Performance Standards (GIPS) reporting and disclosure.

This is what makes this model stand out from other investment fund models:

The model handles up to 10 portfolio investment projects with one preferred partner, one general partner and up to 4 limited partners. It spans the total fund period up to 15 years which is broken down into investments period, exit period and extension period (you can set the length of each period as needed).

The model makes a granular analysis of all financial aspects of a private equity fund:

It generates three financial statements (income statement, cash flow statement and balance sheet)
It performs the analysis of returns at a fund level, by portfolio project and by investor. For each of those, it calculates the internal rate of return (IRR), return on equity (ROE), gross and net return on an unlevered and levered basis and other metrics
In addition, it calculates the sensitivity of those parameters at a fund level to the year of full exit from the fund. This analysis includes both realized and unrealized gains.

The model covers in detail all stages of an investment fund lifecycle and provides great flexibility in terms of inputs:

1. At acquisition stage, it allows you to define all the details of future portfolio projects:

Company background data including legal name, year of incorporation, industry sector, geography, development stage, share of ownership
Investment amount, transaction costs, expected dividend yield and dividend growth rate

You can also define complete terms for every investor:

Type of investor: preferred partner, limited partners (LPs, up to 4 partners), general partner (GP)
For every type of investor individually, you can define shares of ownership in the fund, management fee rate (separately at investment and post-investment period), promote structure (profit split shares between LPs and GP at various income hurdles)
Contributions and profits for every investor are tracked individually

At fund level, the analyst can specify the period of investments, exits and extension (if applicable), the Loan-to-Cost (LTC) ratio, debt interest rate, total committed capital, DSCR and LTV covenants.

2. At operational stage, the model takes into account (in line with user’s inputs) and calculates the amount of fund’s setup costs, the amount of operation expenses and minimum cash balance, the tax rate on dividend income and capital gains.

Along the course of operations, the investment portfolio appreciates. Before it is sold, the amount of appreciation represents unrealized capital gain, which becomes realized after the exit. The model records both types of gain for every portfolio investment.

3. When it comes to exits (disposals of portfolio companies), the model allows to define (for every portfolio company) estimated holding period, exit year, transaction costs and valuation multiple at exit

4. The last stage of an investment fund cycle is distribution of profits. The model assumes there is a preferred partner receiving a guaranteed return on their investment (this can be switched off if there is no such partner). Then there is a waterfall distribution structure of profits in the model between LPs and GP including four hurdles for which you can define the profit margin and share split for every limited partner (LP).

The findings of the model are illustrated by professionally designed magazine-quality charts.

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