easy · Private Equity
What is the 'J-Curve' effect in a private equity fund's lifecycle?
- The increase in a GP's carried interest percentage as the fund achieves higher tiers of performance within a tiered-carry or ratchet structure.
- The tendency of funds to have negative returns in early years due to management fees and investment costs, followed by gains as assets mature.
- The relationship between a higher entry multiple paid at acquisition and a lower expected IRR at a fixed exit.
- The pattern of debt paydown in which loan principal is repaid faster toward the end of the term.
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