What is the irr of the investments gsb partners

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Suppose venture capital firm GSB partners raised $ 150$150million of committed capital. Each year over the 1111-yearlife of the fund,2.5 %2.5%of this committed capital will be used to pay GSB's management fee. As is typical in the venture capital industry, GSB will only invest $ 108.75$108.75million (committed capital less lifetime management fees). At the end of 1111years the investments made by the fund are worth $ 700$700million. GSB also charges 15 %15%carried interest on the profits of the fund (net of management fees).

a. Assuming the $ 108.75$108.75million of invested capital is invested immediately, and all proceeds were received at the end of 1111years, what is the IRR of the investments GSB partners made? That is, compute the IRR ignoring all management fees.

b. Of course, as an investor, or limited partner, you are more interested in your own IRR, that is the IRR including all fees paid. Assuming that investors gave GSB partners the full $ 150$150million up front, what is the IRR for GSB's limited partners (that is, the IRR net of all fees paid).

Reference no: EM131160930

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