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FRM Part II · FRM Exam Part II · Illiquid Assets

An endowment has a private equity fund commitment of USD 100 million. At the start of the year, unfunded commitment is USD 60 million and NAV is USD 40 million. Assume a 25% annual contribution rate on the unfunded commitment at the beginning of the year, a 20% annual distribution rate on beginning NAV (applied before growth), and a 15% growth rate of NAV applied to beginning NAV plus contributions less distributions. What is the NAV at year end?

Year-end NAV is USD 54.05 million: contribution of 15, distribution of 8, pre-growth NAV of 47, then 15% growth. This does not appear among the options.

  1. AUSD 55.0 million
  2. BUSD 59.8 millionCorrect
  3. CUSD 50.6 million
  4. DUSD 63.3 million

Explanation

Contribution = 25% x 60 = 15. Distribution = 20% x 40 = 8. Pre-growth NAV = 40 + 15 - 8 = 47. Growth 15% gives 47 x 1.15 = 54.05. Hence none ... recompute: 54.05 does not match the stated options, so the key option is incorrect.

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