You can calculate the Kaplan Schoar PME ratio for your Private Equity Investments in Eagle Performance Calculation reports.
The Kaplan Schoar PME (KS PME) is a market-adjusted money multiple ratio. This uses the Total Value to Paid-In Capital (TVPI) formula to compare a private asset’s investment performance vs. the equivalent cash flows invested in a benchmark index.
A KS PME greater than one indicates that the investment has outperformed the benchmark index. A KS PME of less than one means the private asset has underperformed the benchmark index.
KSPME Formula
The formula for the KS PME ratio:
Distribution: Total money paid out to Limited Partners from the Fund
Valuation: Value of remaining investment in the fund
Contribution: Total money called in from Limited Partners to Fund
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Formula Dates and Inputs
There are two dates and four inputs for the calculation of the KS PME.
End Market Value
The market value for the private equity investments on the end effective date of the Performance Calculation report.
Sum of Contribution Cash Flows (Paid-In Capital)
The Total of all paid-in cash flows for the private asset investment throughout the date range of the Money Multiple field.
Sum of Distribution Cash Flows
The total of all paid out cash flows for the private asset investment throughout the date range of the Money Multiple field.
Private Equity Benchmark, Benchmark Unit Values, and Growth Factor
Each Private Asset must be assigned a benchmark fund. This is assigned at the security level using Reference Data Center. This value is saved to the PRIVATE_EQUITY_BENCHMARK column in the SECURITYDBO.SECURITY_MASTER_DETAIL and SECURITY_MASTER_DETAIL_HIST tables.
The unit value is the market price of the benchmark on each effective date.
Private Equity Benchmark unit values must be loaded to performance model “eglPrfPc-Total Level Model”.
The Growth Factor is used to convert cash flows to a benchmark equivalent amount as of the end date of the report. This is achieved by dividing the unit value as of the end date of the report by the unit value as of the effective date of the cash flow being converted.
Begin Date
The first date of the time range and the first date cash flows are eligible to be included in the calculation.
End Date
The last date of the time range and the last date cash flows are eligible to be included in the calculation.
KS PME Example
Each Private Equity investment may have contribution flows and/or distribution flows. To calculate KS PME the security will also need an ending market value and Private Equity Benchmark unit values.
Calculate KS PME
The ending market value is combined with the sum of the converted distribution amounts. This sum is then divided by the sum of the converted contribution amounts for the KS PME value. Based on this result (1.0145) the investment is slightly outperforming the market.
Build the KS PME Money Multiple Field
The KS PME multiple is an option found on Money Multiple fields. Money Multiple fields are found in General Reporting in the Custom fields folder. Once a new Money Multiple field is opened you can select Money Multiple Kaplan Schoar PME.
Money Multiple fields are also available in Metadata Center. You can find Money Multiple fields under Direct and Derived fields and by setting the Field Type parameter to Money Multiple.
Use KS PME Multiple Fields
The Money Multiple Field Type is a Performance Calculation based field and the result can be committed to the Performance database for downstream analysis. Money Multiple fields utilize data from the CASHDBO.CASH_ACTIVITY table and HOLDINGDBO.POSITION_DETAIL table. These fields offer the unique capability to sum cash flows across a time range within a Performance Calculation report.
Kaplan Schoar PME fields must also fetch the Private Asset end market value and the security’s Private Equity Benchmark’s unit values from the PERFORMDBO.PERF_SEC_RETURNS table.
Field Options
Field | Description |
|---|---|
Money Multiple | Select the Money Multiple Ratio to Calculate (Kaplan Schoar PME) |
Distribution Cash Flow | Select the Cash Adjustment field which defines a Fund Distribution to Limited Partner |
Contribution Cash Flow | Select the Cash Adjustment field which defines a called contribution by the Limited Partner into the Fund |
End Market Value | Select the Detail Calculation field which defines the market value and security criteria for Ending Market Value |
Begin Date options | Defines the first date that cash flows will be included in the calculation |
PE Benchmark Unit Value | Select the performance field that maps to the correct column in PERF_SEC_RETURNS benchmark unit value |
Include Above Fields in Result | When selected the supporting cash distribution, cash contribution, and market value data is displayed as part of the results |
Assign the Private Equity Benchmark
For the KS PME to calculate the private equity security must have a benchmark assigned at the security level. This is done in Reference Data Center. With the security selected you can assign a benchmark entity to the Private Equity security by selecting the Private Equity Benchmark field. This opens an entity selector user interface where the correct index can be selected.
Select the PE Benchmark Unit Value Column
To calculate the KS PME a benchmark unit value for each cash flow effective date must be present. For this to be fetched you must select a column in PERFORMDBO.PERF_SEC_RETURNS where the unit value will be stored. You will need to create and map a Performance Field to this column.
The KS PME field has the field selector PE Benchmark Unit Value. This opens a field selector with available Performance fields. Now you can select the Performance Field to fetch the unit values.
When fetching the Private Equity benchmark unit values the KS PME field uses the total level from DICTIONARY_ID = 2 and a PERF_FREQ_CODE = D (daily frequency). This means benchmark returns must be loaded to that dictionary with a frequency of daily on the dates that cash flows exist.
Select the Performance Source
The performance source for Private Equity Benchmark unit values is taken from the source rule selected in the report profile. This must be the same as the source on the benchmark unit values.
Select Contribution and Distribution Cash Flows
The security criteria should be the same in all Cash Adjustment and Detail Calculation fields.
Cash Flows Across a Date Range
The cash flows are selected using the Cash Adjustment field logic to identify flows that meet the specific criteria for Private Equity contributions or distributions.
Cash Adjustment fields can use security reference data as well as cash transaction details to select the correct flows. In this example, the Cash Adjustment field is selecting Capital Base Fund Investments which are Private Equity Investments, transaction types equal to LPCASH, and event types equal to RECPTS (receipts) to define distributions to LPs.
Select the End Market Value Detail Calculation Field
KS PME fields require an ending market value. The KS PME field uses a Detail Calculation field to define the security criteria and to select the field in POSITION_DETAIL table where the market value is stored. The market value will be taken from the report results end date. Here is an example:
Select a Performance Model
The Performance Model selector will open up to the list of Performance Models. The Model you select here will be the model (DICTIONARY_ID) used in fetching the benchmark unit values.
Define the Date Range
Begin Date
You can define the begin date by selecting a specific date or using the date macros provided in the Begin Date options. For Performance Composites (ACOM) the inception date is the most recent date of the membership Start Date or the Inception Date within the member’s range. For Reporting Composites (COMP) the Inception Date is simply the member inception date for those who are members as of the report's end effective date.
End Date
The field’s end date is always the end date of the calculation single period in each performance calculation result.
Add to a Report and Field Rule
Money Multiple fields are designed for Performance Calculation reports. They can be selected from the Custom folder in General Reporting or by selected the Money Multiple as the Field Type in Metadata Center.
All Money Multiple fields in a Field Rule must have the same begin date. If not the report will result in an error and null values in the report results.
View the Results
KS PME field results will show up in the security rows for the securities which have cash flows, market values, and benchmark unit values. The cash flows and securities must meet the criteria of the Cash Adjustment and/or Detail Calculation fields selected.
The security criteria should be the same in all fields which require security criteria.
Along with the KS PME value the report can also display the supporting fields Contributions Cash Flow (CCF), Distribution Cash Flow (DCF), and Ending Market Value (EMV) in the results.
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