Alternative Investment Funds · advanced
AIF Mechanics — Capital Calls, Waterfall and Exit
How money moves in an AIF: commitments and capital calls, the distribution waterfall worked through as arithmetic, and vintage, tenure, listing of units and exit.
- 01Commitments, Drawdowns and Capital CallsAn AIF investor usually signs up for a commitment and pays it in parts as the fund calls for money. This lesson explains commitments, capital calls, drawn-down and undrawn amounts, and why the notice period and the consequences of missing a call depend on the fund's placement memorandum.
- 02The Distribution Waterfall — Hurdle, Catch-Up and Carried Interest as ArithmeticA distribution waterfall is the order in which an AIF's proceeds are shared between investors and the manager. This lesson explains the hurdle rate, carried interest and catch-up, and works one full example step by step. All terms in the examples are invented for arithmetic only.
- 03Vintage, Tenure, Listing of Units and ExitThis lesson covers how an AIF investment runs over time and how it ends: what a fund's vintage is, the tenure rules for close-ended funds, how money comes back to investors, and what listing of units does and does not offer by way of exit.