Second, when the actual rate of return of PE is lower than this ratio, LP has the right to get all the income, and GP has no right to extract the performance commission, that is, the premise for GP to get the performance commission is that PE has obtained and realized the investment income that exceeds the priority income.
Third, the priority income of LP should be obtained before other income. Once the rate of return of PE exceeds the threshold rate of return, GP is like crossing a threshold, and it can be rewarded on merit and distributed with performance commission. In practice, some LPAs only specify the specific proportion of return on investment, and do not directly use the names of priority return or threshold return, which actually play the same role. As for the specific proportion, it varies from 6% to 20% or even higher depending on the fund.
Rate of return refers to the rate of return on investment, generally expressed as an annual percentage, and calculated according to the current market price, face value, coupon rate and the time from the maturity date. For a company, the rate of return refers to the percentage of net profit to the average capital used. As the rate of return of personal (and family) and social (government public expenditure) investment, the rate of return research can be divided into personal rate of return and social rate of return, with the former being the main concern.
Investors put the principal C into the market, and its market value becomes V after time t, so in this investment:
1, and the return is: p = v-c.
2. The rate of return is: K=P/C=(V-C)/C=V/C- 1.
3. The annualized rate of return is:
(1) y = (1+k) n-1= (1+k) (d/t)-1or
(2)y=(v/c)^n- 1=(v/c)^(d/t)- 1
Where N=D/T represents the number of repeated investments by investors within one year. D stands for the effective investment time of one year, with bank deposits, bills and bonds being D=360 days, stocks and futures being 250 days, and real estate and industry being D=365 days.
In a market economy, there are four factors that determine the rate of return:
(1) The productivity of capital goods, that is, the expected rate of return of coal mines, dams, highways, bridges, factories, machinery and inventories.
② Uncertainty of capital commodity productivity.
(3) People's time preference, that is, people's preference for immediate consumption and future consumption.
(4) Risk aversion, that is, the part that people are willing to give up in order to reduce risk exposure.