Private Equity

The analysis can trace the amounts charged to a fund or portfolio investment and compare the calculations with financial records and relevant governing documentation. This may involve management-fee schedules, expense ledgers, portfolio-company payments, allocation records, offsets, invoices, and investor reporting. Fee and expense allocation has also been the subject of SEC examinations and enforcement involving private fund advisers.

Valuation materials can include financial statements, portfolio-company operating data, valuation models, investment committee materials, comparable-company information, transaction data, and investor reports. The analysis may test whether calculations and assumptions are internally consistent and whether the recorded valuation follows the methodology reflected in the available fund records. SEC examination materials have identified valuation practices as an area of concern for private fund advisers.

The calculation can be reconstructed using, as applicable, contribution and distribution records, return thresholds, allocation schedules, capital accounts, and the economic provisions reflected in the fund documents. This allows counsel to see how particular inputs affected distributions and carried-interest calculations while leaving contractual interpretation to the appropriate legal decision-maker.