Navigating alternative investments for a secure future.
The Johnsons were presented with an opportunity to invest $25,000 in a private equity fund. While the potential returns were attractive, they were unsure how to accurately assess the impact of carried interest (performance fees) on their overall investment and whether it aligned with their long-term financial goals, especially given their competing priorities of funding three children's college educations and securing their retirement.
Using the Carried Interest Calculator, the Johnsons were able to input the fund's projected returns, hurdle rate, and carried interest percentage. This allowed them to calculate the net return after fees, providing a clear picture of the investment's profitability. They determined that even with a 20% carried interest, the potential net return justified the risk, especially when compared to their existing portfolio's performance. They also utilized the Tax Equivalent Yield calculator to understand the after-tax impact of the investment's returns.
The Carried Interest Calculator allowed the Johnsons to perform sensitivity analysis by adjusting the projected return and hurdle rate, providing a range of potential outcomes. Coupled with the Tax Equivalent Yield Calculator, they gained a holistic view of the investment's potential impact.
$12,000 increase in projected net investment income over the fund's lifetime, allowing them to adjust their college savings contributions accordingly.
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