hard · Private Equity & LBOs

If a sponsor uses a 'Subscription Credit Line' to fund initial capital calls and delays calling capital from LPs for 12 months, how does this practice typically affect the fund's reported performance metrics?

1. It artificially inflates the IRR by shortening the time between the capital call and the distribution, while having no impact on the MOIC.
2. It decreases the IRR because of the interest expense associated with the credit facility.
3. It simplifies the J-curve effect by ensuring the fund starts with positive returns in Year 1.
4. It increases the MOIC by reducing the total management fees paid over the life of the fund.

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