Disbursement or Investment in a Portfolio Company

Now that the money is drawn down from the LP's, the fund will invest in the company. As per our numbers, the fund had to invest 15 in a portfolio company. Investment in a company is also referred to as disbursement.

There might be some deal and indirect expenses that might have happened.

Deal expenses are those that can be directly associated against a deal, and indirect expenses are those that cannot be associated against a deal.

For Example: If there has been some due diligence activity for the company to be invested in, or travelling expenses as a part of finalizing the deal, those charges can be associated directly against the deal. These are classified as deal expenses and these are allocated to LP's in a ratio in which they are participating in the deal.

Expenses like electricity bill of the AMC, salaries of employees of AMC, cannot be allocated against a single deal. These must be spread across all the deals and must be allocated to all deals in their invested amount proportion. Such expenses are hence referred to as indirect Expenses.

Drawn Down Money:	20
Investment Amount:	15
Management Fees:	2
Deal Expenses:	1
Indirect Expenses:	1
Cash Balance:	1

Let us see how all these expenses and investments are allocated to each LP.