Private equity manager

PE manager Investors sets up fund

(General partner) (Limited partners)
1 Commitment for funds from
investors (eg. pension funds)
to PE Fund

2 Annual management fees

from fund to manager

3 Investment made by fund into

‘Newco’ buying target company
(management also invests)

4 May include direct company

investment by limited partners

Carried interest Fee Capital Commitment Interest 5 Interest paid on loanstock

element of investment either six
8 2 7 1 5 monthly or annually. may be
Co-investment rolled-up and repaid as capital
on exit
4 6 Capital repaid on exit
Capital

6 7 Fund capital distributed as

released from exited
investments

8 Carried interest (bonus) paid to

PE fund general partner when fund
(Limited liability partnership) achieves hurdle rate of return

For a ten-year fund, new

investments would typically be
made up to years three and four,
with follow-on investments in
years five to six. The fund would
be wound up sometime
between six and ten years
Investments Interest Capital

3 5 6

Investee companies

Source: Deloitte FT montage