CAIA - 13 - Management of Liquidity Flashcards Preview

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Flashcards in CAIA - 13 - Management of Liquidity Deck (20)
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1

Modeling cash flows of PE investments is essential for liquidity management and may provide some advantages:

 

1. Improving ___ ___for undrawn capital

2. Increasing the PE allocation's profit using an ___-___strategy

3. Calculating an ___ ___when a discount rate is available

4. Monitoring a portfolio of PE funds' ___ ___and ___-___ profiles

Modeling cash flows of PE investments is essential for liquidity management and may provide some advantages:

 

1. Improving investment returns for undrawn capital

2. Increasing the PE allocation's profit using an over-commitment strategy

3. Calculating an economic value when a discount rate is available

4. Monitoring a portfolio of PE funds' cash flows and risk-return profiles

2

___ ___is illiquidity that is inherent in an investment's terms

Structural illiquidity is illiquidity that is inherent in an investment's terms

3

___ ___is illiquidity resulting from market conditions

Cyclical illiquidity is illiquidity resulting from market conditions

4

There are 2 reasons LPs experience liquidity issues

 

1. Using an ___-___strategy

2. Using a ___-___strategy

There are 2 reasons LPs experience liquidity issues

 

1. Using an over-commitment strategy

2. Using a self-funding strategy

5

A ___-___strategy involves LPs using distributions from mature PE funds to finance capital calls from young PE funds.

self-funding strategy involves LPs using distributions from mature PE funds to finance capital calls from young PE funds.

6

___ ___ is the risk that LPs are unable to redeem or liquidate their investments when they want to or they have to sell their investments at depressed prices.

Exit risk is the risk that LPs are unable to redeem or liquidate their investments when they want to or they have to sell their investments at depressed prices.

7

For US and European venture capital, most capital is called between years ___ and ___of the fund's life.

For US and European venture capital, most capital is called between years one and five of the fund's life.

8

After the fund's investments have matured and increased in value, the fund enters the ___ ___.

After the fund's investments have matured and increased in value, the fund enters the harvesting period.

9

Most distributions of VC funds occur after year ___.

Most distributions of VC funds occur after year six.

10

___ ___are short-and medium-term lines of credit from external sources that LPs can use to meet capital calls when they run out of cash.

Liquidity lines are short-and medium-term lines of credit from external sources that LPs can use to meet capital calls when they run out of cash.

11

What are the 5 sources of liquidity for PE investors:

 

1. ___ lines

2. Maturing ___investments

3. ___other investments

4. ___limited partnership shares

5. ___from PE funds

What are the 5 sources of liquidity for PE investors:

 

1. Liquidity lines

2. Maturing treasury investments

3. Realizing other investments

4. Selling limited partnership shares

5. Distributions from PE funds

12

Undrawn capital should ideally be managed by ___

Undrawn capital should ideally be managed by LPs

13

___ ___ ___is the long-term management of commitments with the goal of constructing and maintaining a balanced, stable portfolio that is in line with the investment strategy.

Strategic commitment steering is the long-term management of commitments with the goal of constructing and maintaining a balanced, stable portfolio that is in line with the investment strategy.

14

Cash flow projection models take into account 4 key factors:

 

1. ___ and ___data

2. Expert ___

3. ___and ___data

4. ___

Cash flow projection models take into account 4 key factors:

 

1. Market and empirical data

2. Expert judgement

3. Drawdown and distribution data

4. Models

15

There are 3 cash flow projection models:

 

1. ___

2. ___

3. ___

There are 3 cash flow projection models:

 

1. Estimation

2. Forecasting

3. Scenarios

16

___ cash flow projections are based on short term, current market conditions and is used for data gathering and analysis.

Estimation cash flow projections are based on short term, current market conditions and is used for data gathering and analysis.

17

___ cash flow projections are for medium term time periods, specific market environments and involve quantitative modeling.

Forecasting cash flow projections are for medium term time periods, specific market environments and involve quantitative modeling.

18

___ cash flow modeling involves the long-term, an uncertain market environment and is used for planning purposes.

Strategic cash flow modeling involves the long-term, an uncertain market environment and is used for planning purposes.

19

Over-commitment ratios tend to be ___%-___%

Over-commitment ratios tend to be 125%-140%

20

To achieve a higher over-commitment level, LPs should diversify across ___ ___.

To achieve a higher over-commitment level, LPs should diversify across vintage years.

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