Private equity
Academy essentials
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Portfolio diversification
High risk-adjusted returns
Low correlation to other asset classes
Long holding period
1. Which of the following is not a reason to invest in private equity?
Question 1 of 10
PE
Highly levered
Usually listed
Usually unlisted
Potential target companies in an LBO
Question 2 of 10
2. Which of the following is a common characteristic of the underlying portfolio companies in venture capital investment?
PE firms acquire controlling stakes in companies but VC firms typically acquire minority stakes
PE firms acquire minority stakes in companies but VC firms typically acquire majority stakes
PE firms are onshore companies while VC firms are offshore entities
PE firms do not use leverage while VC firms typically take on a large amount of leverage
3. Which of these is a common difference between private equity (PE) firms and venture capital (VC) firms?
Question 3 of 10
Double layer of fees
Can provide the necessary resources and address the information gap of inexperienced PE investors
Can cause an investor to lose access to information and control as opposed to making an investment directly in a private equity fund
All of the above
4. Which of the following best describes funds of funds?
Question 4 of 10
Whole fund
Tag-along provision
Claw-back provision
5. Which of the following is considered the best mechanism for distributing carried interest to the GP from an LP's perspective?
Deal by deal
Question 5 of 10
Investment in highly leveraged companies
Investment in listed companies
Investment in companies that have filed for Chapter 7 bankruptcy
Investment in young and early-stage companies
6. Which of the following statements is a characteristic in venture capital investing?
Question 6 of 10
Growth
Turnaround
Venture capital
7. Which of the following is a private equity strategy?
Question 7 of 10
A minimum rate of return a GP must meet before receiving their performance fee
A maximum rate of return a GP must meet before receiving their performance fee
A standard rate to cover administrative, operational, and management items
A rate that allows investors to receive back previously paid incentive fees
8. What does ‘hurdle rate’ refer to in a private equity limited partnership fund?
Question 8 of 10
Distribution to paid-in (DPI)
Total value to paid-in (TVPI)
Risk to reward measurement (RRM)
Internal rate of return (IRR)
9. Which of the following is not a measure of performance in private equity funds?
Question 9 of 10
Net cash flows are often positive in the early years, before decreasing and turning negative in later years
Net cash flows are often negative in the early years, before increasing and turning positive in later years
Net cash flows are often negative in the later years, after increasing and turning positive in early years
Net cash flows are often positive in the early years, before increasing in later years
10. Which of the following describes the ‘J-curve’ effect in private equity funds?
Question 10 of 10
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