As investors increasingly rely on a fund’s distributed to paid-in capital (DPI) ratio to measure investors’ cashflow experience, the industry is becoming more sophisticated about the different fund management practices that can artificially inflate and distort funds’ DPI figures. Those distortions raise concerns about the transparency of disclosures provided to existing and prospective fund investors, as well as about fund-level risk management practices used by sponsors. The most prominent technique for manipulating DPI figures is for fund managers to issue “synthetic” distributions via borrowings under fund financing facilities, which is rapidly becoming discouraged in the industry. There are other fund management practices that LPs should be aware of, however, that can similarly juice a fund’s DPI, such as using full fund flow calculations; including special or affiliate investors in the figures; prematurely selling assets; recalling distributions; using syndication arrangements; and miscalculating returns of excess capital. This second article in a two-part series explores the myriad fund management practices that can potentially distort DPI calculations, why they are so concerning for investors and steps that LPs can take to protect themselves. The first article explained what DPI is; variables to consider when calculating and evaluating DPI; its rising popularity in the private funds industry; and how different classes of investors are using DPI figures. See our two-part series on IRR calculations: “Fundamental Flaws of IRR and How Sponsors Can Avoid Distorted Calculations” (Nov. 12, 2019); and “Practical Steps Investors Can Follow to Diligence Flawed IRR Calculations” (Nov. 19, 2019).