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Adithya Pappala

Launching India's Fi...ย โ€ขย 5m

#9TDAYVC-DAY-15 What are Additional Returns? What is the Catch-Up Clause? In Developed Markets, The structure is in 2-20% where 2 is Management Fees & 20 is Additional Returns.Additional Returns & 2-20 structure is not ideal in Indian AIF Market.Additional Returns could entirely depends on the Manager & his track record of experience. Investment Managers that deliver consistent returns above the preferred returns can expect the Additional Returns. As AIFโ€™S are highly Illiquid in nature, Management Fees can be payable based on the NAV of the fund from time to time.NAV is the valuation of a fund like Assets-liabilties.Example,If a VC had 100 Crores of Assets & Liabilities are valued at 10 Crores then the NAV is 90 Crores.Additional Returns can only be assessed while they exit.The Investment Agreement also specify whether it will haveโ€œCatch-Upโ€ Provision or not?The catch up clause is meant to make investment managers extra additional returns of total returns. Shoot the Comments

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