a)Direct investing. CPP invests $1bn over 3 years in direct investing. These funds are drawn down in 3 equal installments in the first 3 years. The cost of compensation and fees associated with the investment is 1.5% of the amount invested, incurred at the time of the deals. In each of the first 3 years, the invested capital is the drawn down capital less fees. There are no fees after the first three years. Each investment sells exactly 5 years after its original investment. The gross multiple of invested capital on each of these investments is 2.5 times. What is the NPV of returns for direct investing to CPPIB. Use a constant discount rate of 15%.

b)Fund investing. Assume that CPP commits $1bn to invest in funds. These funds are drawn down in 3 equal installments in the first 3 years. The GP charges fees of 1.5% per year for eight years. In addition the GP charges a carry of 20% of profits defined as returns in excess of committed capital. In each of the first 3 years, the invested capital is the drawn down capital less fees. Each investment sells exactly 5 years after its original investment. The gross multiple of invested capital on each of these investments is 2.5 times. What is the NPV of returns for fund investing to CPPIB. Use a constant discount rate of 15%. How large does the multiple of invested capital have to be under fund investing to generate an equivalent NPV for CPPIB as for direct investing?

c)Fund-of-Fund investing. Assume that CPP commits $1bn to invest in fund-of-funds. The GP charges fees of 1.5% per year for eight years, and charges a carry of 20% of profits defined as returns in excess of committed capital. The fund-of-funds chargest in addition its own fee of 1% and its own carried interest of 5%. Funds available for investment are the committed capital less the sum of fees. The funds available for investment are invested in 3 equal instalments in the first 3 years. Each investment sells exactly 5 years after its original investment. The gross multiple of invested capital on each of these investments is 2.5 times. What is the NPV of returns for fund-of-funds investing to CPPIB. Use a constant discount rate of 15%. How large does the multiple of invested capital have to be under fund-of-fund investing to generate an equivalent NPV for CPPIB as for direct investing?