Investment Partnerships are limited partner ("LP") interests in venture capital and private equity funds. They typically involve a commitment to invest between $50,000 and $5,000,000 in a fund over a period of several years. This amount is called the "Capital Commitment". Returns to the investor also come over a period of many years (3 to 10 years or sometimes even longer) and are provided in the form of cash distribution or equity (stock) distributions. Cash distributions usually results from realized gains or losses which are reported in a K-1 to the investor. Stock distributions are generally non-taxable, and the investor inherits the cost basis and cost basis date from the fund.
Investors in a fund receive a quarterly report that includes a statement of their capital account; this is how much their investment is currently worth – distributions already received are not part of that value. Typically, the value of the fund as a ratio to dollars invested starts out around 1.0, increases as the fund reports unrealized gains on investments it has made, and then decreases again as distributions occur. Investors measure their investment performance by looking at the "MOIC" (multiple of invested capital), which is the value of their current holding + distributions received divided by invested capital. They also look at "Cash MOIC" which is the value of distributions received divided by invested capital; and IRR, which measures the internal rate of return on their cash investments, distributions over time, and remaining value.
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The partnership Set up action creates a security of type "Inv Partnership" and allows the user to specify the capital commitment amount, the date on which the LP interest was established and an optional Tax ID for the partnership.
Setting up the first Investment Partnership also enables the Investment Partnership Summary and Investment Partnership Detail reports on the Reports/Investing menu.
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For cash distributions, the transfer account is the account where the funds will be deposited (which will show up in two components if a return-of-capital amount was specified).
For stock distributions, the transfer account is a self-transfer, to reflect that there is no actual cash change. The securities received will be records as an "Added" transaction in the specified investment account (the self-transfer component of the Added transaction offset the other self-transfers). The Added transaction will set the cost basis and cost basis date as provided, and Quicken will also make the appropriate price history entry to reflect the current value of the securities received.
Quicken provides an option, off by default, to decrease the market value of the LP interest by the value of the distribution. For a large distribution that will have a material impact on the remaining value, users may wish to enable this option.
Partnership – Set Value
The Set Value action allows a user to enter the total value of their partnership interest and have Quicken make the appropriate price history entry to reflect this. Note that this value is the "remaining value" in the fund, leaving aside the value of distributions that have occurred.
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