The returns of the underlying funds come in a return of principal value that is higher than the original capital. A limited partner, or the investor, commits an amount of capital, and the underlying PE funds call from the capital over time. Calculating returns is challenging which is why Internal Rate of Return (IRR) is one way to calculate. Each form of performance return calculation has its strength and weakness but very often confuses the novice investor such as the businessman who has a lot of money but are very new to this space.
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