First, the basis for determining the income distribution model of private equity investment funds

Partners of limited partnership private equity investment fund include general partner (GP) and limited partner (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. LP provides most 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). 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.

Secondly, the income distribution model of partnership private equity investment fund is introduced.

According to the discussion on the basis of determining the income distribution mode of private equity investment funds, at present, the PE industry has basically formed the income distribution mode in the order of giving priority to investors' full investment return, giving priority to income-GP incentive-proportional distribution. Specifically, the funds withdrawn from investment will be returned to all investors in priority according to the investment proportion, and will be distributed to investors in priority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. It should be noted that the "catch-up clause" is designed to effectively motivate GP. In order to fully realize the purpose of this clause, in general, LP and GP determine the catch-up ratio between 20%- 100%. That is, if the catch-up ratio of 100% is determined, it means that investors will suspend distribution after giving priority to 8% annualized compound interest, and the rest will be allocated to GP until the ratio of the part divided by GP to the accumulated part divided by all investors is1:4; If the catch-up ratio is less than 100%, the remaining investors will be distributed among GP and all investors in proportion at the same time until the ratio of the part divided by GP to the accumulated part divided by all investors is 1:4. It can be seen that if GP fails to create enough income for the fund and fails to distribute it according to the catch-up ratio of 100%, GP will get less than 20% investment income, which is