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Public Market Equivalent calculation

Hi all,

I’ve been prepping with CAIA Association materials and Kaplan side by side, and noticed a difference in their calculation of Public Market Equivalent units (Chapter 2.6: Measuring Performance and Benchmarking in Private Equity).

On Page 128 of CAIA Association book, units of the public index are acquired based on fund drawdowns (cash outflows) and the opposite for sold units (based on distributions); however Kaplan seems to treat this situation in the opposite way (it acquires units of the public index based on cash distributions, and sells units based on drawdowns) - this is based on their solution for Question 7 (C) (page 173, Chapter 2.6)…

Can anyone advise as to which is the correct method?

Sometimes you're the windshield wiper, sometimes you're the bug.
CAIA, CFA Level II Candidate.

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You buy the public index with drawdown amounts and sell the public index in the amount of the distribution.

Ramos4rm, CFA, CAIA