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IBBC CAPITAL ACADEMY / 2027

Read a fund waterfall and the evidence behind a mark

Independent IBBC Capital draft content for self-study. Not affiliated with or endorsed by CFA Institute. New lessons await subject-matter review. No CFA designation or official PSM credit is awarded.

Learning goals

  • Calculate DPI, RVPI and TVPI, and distinguish realized from marked value.
  • Calculate carry and investor proceeds in the separate stated waterfall.
  • Explain one valuation-control action for the stale asset mark.

Draft · approximately 35 minutes, excluding further revision.

Case facts

A fictional closed-end fund has paid-in capital 100, cumulative distributions 40 and residual NAV 90, all in the same currency and without a subscription-line adjustment. An asset is marked at 60 based on an old multiple even though comparable transactions have weakened. The committee also evaluates a separate simple distribution: capital 100 is returned first, then an 8 profit preference, then 20% carry on remaining profit with no catch-up. Total distributable cash is 150. This simplified waterfall is not asserted to describe the fund’s actual legal agreement.

Decision framework

DPI measures realized distributions relative to paid-in capital; RVPI measures residual marks; TVPI adds the two. None accounts for timing like an IRR. A high TVPI can depend heavily on marks that are not realized cash. Use current evidence, explicit valuation assumptions and an independent challenge process; a smooth NAV path can reflect appraisal lag rather than low economic risk.

Formula and assumptions

Decision → calculation/evidence → case-specific reason → limitation

Compare with the model response after drafting
  1. DPI=40/100=0.40; RVPI=90/100=0.90; TVPI=1.30. Most reported value is still residual NAV, not distributed cash.
  2. Separate waterfall: cash after capital and preference=150−100−8=42; carry=8.4; investor receives 141.6 in total. A catch-up clause would change this calculation.
  3. Challenge the 60 mark against updated comparable evidence, valuation-date facts and downside scenarios. Document reasons and conflicts; obtain independent review rather than simply freezing the old multiple.

Errors to catch

  • State a recommendation only after identifying the case constraint and calculation.
  • Rubric results are your self-assessment, not an official or AI grade.

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Sources and coverage status

These original lessons are drafts. Public outlines are used to check scope; the official learning-outcome text and proprietary question banks are not reproduced here. Follow the source for exam-year requirements and updates.