Given a text T, and several options, according to the question posed in the text T to choose the most appropriate option from the options as the answer, please directly output the most appropriate option, do not need to output the explanation.

Martha Brady is the CIO of the Upper Darby County (UDC) public employees’ pension system. Brady is considering an allocation of the pension system’s assets to private equity. She has asked two of her analysts, Jennifer Chau, CFA, and Matthew Hermansky, to provide more information about the workings of the private equity market.Brady recognizes that the private equity asset class covers a broad spectrum of equity investments that are not traded in public markets. She asks Chau to describe the major differences between assets within this asset class. Chau notes that private equity ranges from venture capital financing of early-stage companies to complete buyouts of large publicly traded or even privately held companies. Chau describes some of the characteristics of venture capital and buyout investments.Chau mentions that private equity firms take care to align the economic interests of the managers of the investments they control with their own. Various contractual clauses are inserted in the compensation contracts of the management team in order to reward or punish managers who meet or do not meet agreed-upon target objectives.One concern Chau highlights is the illiquidity of private equity investments over time. Some funds are returned to investors, however, over the life of the fund because a number of investment opportunities are exited early. Provisions in a fund’s prospectus describe the distribution of returns to investors, some of which favor the limited partners. One such provision is the distribution waterfall mechanism that provides distributions to limited partners (LPs) before the general partner (GP) receives the carried interest. This distribution mechanism is called the total return waterfall.Chau prepares the following data to illustrate the distribution waterfall mechanism and the funds provided to limited partners when a private equity fund with a zero hurdle rate exits from its first three projects during a three-year period.
| Exhibit l.Investment Returns and Distribution Waterfalls |
| Private equity committed capital | $ 400 million |
| Carried interest | 20% |
| First project investment capital | $20mllon |
| Second project investment capital | $45mllon |
| Third project investment capital | $50mllon |
| Proceeds from first project | $25mllion |
| Proceeds from second project | $ 35 million |
| Proceeds from third project | $65mllon |


Chau cautions that investors must understand the terminology used to describe the performance of private equity funds. Interpretation of performance numbers should be made with the awareness that much of the fund assets are illiquid during a substantial part of the fund’s life. She provides the latest data in Exhibit 2 for the Alpha, Beta, and Gamma Funds, diversified high-technology venture capital funds formed five years ago, each with five years remaining to termination.
| Exhibit 2.Financial Performance of Alpha， Beta， and Gamma Funds |
| Fund | PIC | DPI | RVP I |
| Alpha | 0.30 | 0.10 | 0.65 |
| Beta | 0.85 | 0.10 | 1.25 |
| Gamma | 0.85 | 1.25 | 0.75 |


Chau studies the data and comments, Of the three funds, the Alpha Fund has the best chance to outperform over the remaining life. First, it’s because the management has earned such a relatively high residual value on capital and will be able to earn a high return on the remaining funds called down. At termination, the RVPI will be double the 0.65 value when the rest of the funds are called down. Second, its cash-on-cash return as measured by DPI is already as high as that of the Beta Fund. The PIC (or paid-in capital) ratio indicates the proportion of capital already called by the GP. The PIC of Alpha is relatively low relative to Beta and Gamma.Hermansky notes that a private equity fund’s ability to properly plan and execute its exit from an investment is vital for the fund’s success. Venture funds, such as Alpha, Beta, and Gamma, take special care to plan their exits.Brady then asks the analysts what procedures private equity firms would use to value investments in their portfolios as well as investments that are added later. She is concerned about buying into a fund with existing assets that do not have public market prices that can be used to ascertain value. In such cases, she worries, what if a GP overvalues the assets and new investors in the fund pay more for the fund assets than they are worth?Hermansky makes three statements regarding the valuation methods used in private equity transactions during the early stages of selling a fund to investors.Statement 1: For venture capital investment in the early stages of analysis, emphasis is placed on the discounted cash flow approach to valuation.Statement 2: For buyout investments, income-based approaches are used frequently as a primary method of valuation.Statement 3: If a comparable group of companies exist, multiples of revenues or earnings are used frequently to derive a value for venture capital investments.
The exit route for a venture capital investment is least likely to be in the form of a(n):
Option A:initial public offering (IPO).
Option B:sale to other venture funds targeting the same sector.
Option C:buyout by the management of the venture investment.

Answer: C