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 come over many years (3 to 10 years or sometimes even longer). Investment Partnerships pay out as cash distributions or equity (stock) distributions. Cash distributions usually result 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 fund's value as a ratio to dollars invested starts 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 divided by invested capital. They also look at Cash MOIC (the value of distributions divided by invested capital) and IRR, which measures the internal rate of return on their cash investments, distributions over time, and remaining value.
The data model in Quicken is that the LP Interest in an investment partnership is a security with Security Type Inv Partnership. Quicken assigns the asset class Alternatives to these securities. The user's cash investment results in one share in the LP interest per dollar invested. The price of the investment per share is the net value of the LP interest divided by the number of shares. Users can update the price per share to reflect the value of their capital account.
When the user fulfills a capital commitment, Quicken uses a Bought transaction to increase the number of shares. When there is a distribution, Quicken records transactions to reflect the amount of invested investment gains and the amount of capital returned and to cause the cash or stock distributed to appear in the appropriate Quicken account.
Quicken tracks the cost basis for the LP Interest as the cumulative capital contribution less any cost basis returned in cash or stock distributions. Because of the complexity of tax reporting for investment partnerships, users should rely primarily on the reporting (Capital Account statements and K-1s) provided by the fund for tax preparation and planning.
Entering Investment Partnership Transactions
To make tracking investment partnerships easier, Quicken has added five Investment Actions in the Enter Transactions wizard for investment accounts.
Partnership – Set up
Before using the Partnership – Set Up action, users should choose which investment account is going to will contain the transaction history for their LP interests. This The investment account should be a manual account. Quicken recommends using a single account , with a name like "PE PE & VC Funds". However, there is no requirement that all the Investment Partnerships are tracked in Quicken does not require you to track all Investment Partnerships in a single account.
The partnership Set up action Setting up a partnership creates a security of type "type Inv Partnership" and . In addition, it allows the user to specify the capital commitment amount, the establishment date on which the LP interest was established for the LP interest, and an optional optional Tax ID for for the partnership.
Setting up the first first Investment Partnership also also enables the the Investment Partnership Summary and and Investment Partnership Detail reports reports on the the Reports /-> Investing menu menu.
Partnership – Close Out
This action sets the partnership share balance (and thus market value) to zero, and marks the partnership as hidden, causing it to be excluded from reports by default. It is intended to be used for partnerships that are no longer active. Note that by customizing the partnership reports, these Closed/hidden partnerships can still be included in reports.
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