FRM Part II · FRM Exam Part II · Private Markets Investing
An LP has committed $100 million to a private equity fund. After several years, it has paid in $70 million and received distributions of $28 million. Using paid-in capital, what are the LP's unfunded commitment and its DPI (distributions to paid-in capital)?
Unfunded commitment is $30 million, being the $100 million commitment less $70 million paid in. DPI is 0.40, being $28 million of distributions divided by $70 million of paid-in capital, not by the total commitment.
- AUnfunded $30 million; DPI 0.40Correct
- BUnfunded $72 million; DPI 0.28
- CUnfunded $30 million; DPI 0.28
- DUnfunded $42 million; DPI 0.40
Explanation
Unfunded commitment = 100 - 70 = $30 million (ignoring recycling). DPI = distributions / paid-in = 28/70 = 0.40. Dividing by the commitment gives 0.28, which is the wrong base. Netting distributions against paid-in capital to get unfunded is also wrong.
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