Interested in how to best account for “traditional” VC funds where you typically use TVPI, DVPI, RVPI, MOIC etc over fund lifetime. I.e. expressing everything in terms of multiples on original capital (your cost base).
Over the life of the fund, which is many years (and assuming capital calls are out of the way), you get distributions and revaluations on the remaining capital. I know sharesight is more geared to public markets, but to date I have been doing the following:
account for the fund as a unit-based investment, with one unit = 1.00 AND total value = # of units held x 1.00 to get to the nominal cash value invested at the outset…
record distributions as simple dividends of cash at nominal value (this creates some form of yield per sharesight)
adjust the unit price (ONLY) as the valuation of the fund (of the residual remaining capital) changes.
I understand in the END I will get a correct overall compound return, and with this approach I get to see the actual cash yield over the course of the investment, but I am pretty sure the component parts (div yield and capital gains) are going to be wonky. For instance, as fund starts to return cash, eventually the residual unit price goes to zero. For a “successful” fund you end up with the cash from distributions being some multiple of the original cash in, but on face value you would show this as a severe destruction of capital…I hope you get the drift. The other issue is that in an integrated portfolio this effect will distort your overall performance components. Good problem to have I guess…
Appreciate any advice from others as to how to do this any better.
Thank You