1. According to the discussion on the basis of determining the income distribution model of private equity investment funds, at present, the PE industry has basically formed an income distribution model that gives priority to the return of all investors' investments, with income priority-GP incentive-proportional distribution as the order.
2. Specifically, the funds withdrawn from investment will be returned to all investors in priority according to the investment proportion, and will be distributed to investors in priority according to 8% annualized compound interest (the principle of distribution is to consider the interest occupied by funds, referred to as capital occupation fee), so as to realize the preservation of the capital contributed by all investors.
Then, according to the catch-up clause, GP is encouraged on the basis of satisfying LP investment preservation. That is to say, after giving priority to investors, the remaining part is distributed to GP in proportion or between GP and all investors until the ratio of the divided part of GP to the accumulated part divided by all investors is 1:4. Then, if there is any surplus on the basis of this distribution, the final distribution will be made directly according to the proportion of 20% allocated by GP and 80% allocated by all investors.
Second, the basis for determining the income distribution model of private equity investment funds
1. Partners of a limited partnership private equity investment fund include general partners (GP) and limited partners (LP). Among them, GP is generally a fund management company with a professional investment management team, which mainly provides fund investment and operation management, and provides a small amount of capital contribution.
2.LP provides most of the funds and generally does not participate in the investment and operation management of funds. From the profit point of view, GP mainly realizes the profit of the fund by providing good investment management and decision-making, and obtains the return on investment; LP, on the other hand, obtains a return on investment by providing funds (maintaining and increasing value).
3. Therefore, the basis for determining the income distribution model of private equity investment funds focuses on: how to effectively bind the interests of GP and LP, how to effectively motivate GP, and how to realize investors' desire to preserve and increase value.