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Equalizations App

The equalizations app handles recalculating investor allocations when new investors join the fund or allocation rules change.

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What is an Equalization?

When funds process transactions, they’re often posted at a high level and allocated to individual commitments. Over time, these allocations may need to change due to:
  1. New closings - New investors joining the fund
  2. Allocation rule changes - Business logic updates
  3. Transfers/Cancel-corrects - Investor class changes
An equalization catches all investors up to their current allocation. The net effect on the fund is always $0 since some investors go up and others go down.
Fees, calls for fees, and adjustments are generally not equalized - they’re handled differently.

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Why Allocations Change

When new investors join through a closing:
  • New edges are added to the allocation graph
  • Edge weights change
  • Existing investors’ allocations decrease
The fund’s allocation calculation may change:
  • Different basis for early vs. late fund life
  • Example: Committed capital for first 3 years, then actual fees
When an investor transfers ownership:
  • May change the commitment’s investor class
  • May change allocation percentages

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Cash vs. Deemed Equalizations

  • Calculated immediately when allocation rules change
  • No cash changes hands
  • Transactions marked with is_equalization_accrual=True
  • Used for fee basis calculations

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Calculation Steps

1

Calculate Existing Allocation

Query all transactions for the use to find the total amount already allocated to each commitment.
2

Calculate New Allocation

Re-run the allocation logic with the new rules to determine what the allocation should be.
3

Calculate Difference

For each commitment: new_allocation - existing_allocation = equalization_amount
4

Calculate Interest

Interest is charged/paid on the difference amount from the original date to the equalization date.

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Interest Netting

Interest must net to $0 across all investors. Any remainder is allocated to the largest investors using the rounding scheme.

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System Implementation

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Deemed Equalizations

Created automatically when allocation rules change: 
# For each previous capital call/distribution
create_equalization_calculate_from_scratch.py
    ├── Spin off Celery task per event
    ├── Calculate existing allocations
    ├── Calculate new allocations
    ├── Create difference transactions
    └── Calculate and net interest

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Cash Equalizations

Triggered when users choose to process:
  1. User navigates to capital event
  2. System shows outstanding deemed equalizations
  3. User opts to create cash equalization
  4. Cash transactions are generated

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Example Scenario

Initial State (after first closing):
  • LP1: 100,000commitment,100,000 commitment, 50,000 called
  • LP2: 100,000commitment,100,000 commitment, 50,000 called
After Second Closing (LP3 joins with $100,000):
  • LP1 new allocation: $33,333
  • LP2 new allocation: $33,333
  • LP3 new allocation: $33,333
Equalization:
  • LP1 receives: $16,667 (refund)
  • LP2 receives: $16,667 (refund)
  • LP3 pays: $33,333 (catch-up)
Net effect on fund: $0

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Configuration Options

OptionDescription
Interest opt-outDisable interest calculations
Different datesSeparate effective dates for call vs. distribution
Closing-by-closingEqualize per closing vs. lump sum

Closings

How new investors join the fund.

Capital Calls

Original capital call allocation.

Allocators

How allocations are calculated.

Transactions

Transaction tracking.