Best Practices for tracking Private Equity?

acloudman

I found this blog post by Quicken which suggests the best way to track Private Equity investments is to create a separate account:

https://www.quicken.com/blog/private-equity-investing/

Here’s how to track private equity investments in Quicken

Create a private equity account with a zero asset value. Remember to make it a manual account. It’s a private investment, so there won’t be any automatic downloads to or from it directly. You’ll have to update the account yourself.

Transfer your initial capital call to the private equity account. Typically, for the first capital call, you’ll write a check or wire the money out of your bank account. That transaction will come in from your bank as an automatic update — minus $5,000 or minus $8,000 for example. Take that value and transfer it to the private equity account, giving it a positive addition in the same amount.

Increase the value by future calls and adjust for NAVs. As you add more capital to the investment, transfer the investment to the private equity account each time, increasing the value. If it’s a private equity fund that’s sending you reports, adjust the value manually to reflect the value reported as those come out. If you label it “Increase (or Decrease) in value,” the value in Quicken will always represent the most recent NAV plus any capital you’ve added since, and your historical Quicken data will represent those changes over time.

Adjust for cash received. Hopefully, that fund is going to send you cash back. As it does, those funds will show up in your bank account, and you’ll need to transfer that amount from your private equity account in Quicken. At times, that will make your private equity account look “overdrawn,” showing a negative value because the fund produced more than you put in (which is what you want from any investment). Simply true up the account by adding a manual increase in value to what the post-distribution NAV should be.

Using this process, you’ll track the hard cash flows in and out of your bank account as well as all the value moves of the private investment, which is great for historical performance.

It’s also helpful when you start thinking about capital planning. If you have 5 or 10 of these, for example, and you’re going to be capital called year after year after year, using this system to track your private investments in Quicken is a great way to plan for that.

My question is how to adjust the value (NAV) as mentioned in this post? I created "Other Investment" type accounts but what transaction type should I use for those value adjustments? I found "MiscExp" for losses and "Deposit" for gains but I'm not sure those are ideal? And what category should those transactions have (e.g. Investment Expense, Investment Income)? Or I've seen suggestions in this community to create a new security that represents the fund and add shares and adjust value that way? Should I do that within the account?

Thanks!

Boatnmaniac

I used to have a Private Equity Fund account and set it up as an Other Investment Account, as well. What I did to manage it in Quicken was to:

1. Create a manual Security for the Fund. In my case there was no ticker pre-established for it so I made one up for it but I know some such Funds will select a ticker for it for their own internal purposes. You can do whichever you feel is most appropriate.
2. I did not deposit Cash into this Account. Instead, I did a Buy transaction for X-number of shares at $X.XX per share. In this transaction I transferred Cash from my funding account (in my case, it was from Savings) to the Buy transaction. This established the initial value and cost basis of the investment. (If you have already deposited the Cash to the Account, then when you do the Buy transaction select the option to use the Account's Cash Balance to fund the Buy.)
3. Periodically I would make additional Buys of this Security following the same process as in #2.
4. About 1X per quarter I would get a statement from the Fund manager showing the current invested value and cost per share (i.e., the NAV cost). I would use the cost per share from this statement to manually update the share price (Tools > Security List > click on the Security you created which will open Security Detail View for it > More > Edit Price History > New > enter the date and new share price > OK). This will update the value of your total investment(s) made to date.

Does this answer your question?