Private Fund Insights Blog

As in most industries, private fund sponsors are increasingly assessing and beginning to adopt artificial intelligence-powered tools to rapidly analyze large volumes of data, identify trends and patterns and to generally make more informed decisions both in connection with internal operations and management of their funds and for enhancing efficiencies at their portfolio companies. AI technology’s ability to process information from disparate sources, such as financial reports, news articles and social media, and to purportedly predict market movements and inform ...

In March, we discussed how net asset value loans are an effective and versatile tool for private investment fund managers, the use of which has ballooned in recent years. In response, the Institutional Limited Partners Association recently released guidance outlining best practices for both fund managers and LPs in approaching NAV loans. This post highlights key takeaways from ILPA’s guidance for consideration by fund investors and managers.

Potential Risks

While the ILPA guidance highlights a variety of beneficial use cases for NAV loans, it also warns they can create ...

In June, California approved amendments to its October 2023 law, Fair Investment Practices by Venture Capital Companies (California VC Diversity Law). The California VC Diversity Law requires covered venture capital investment vehicles to report aggregated demographic information about the founding members of their portfolio companies.

Covered Entities

The California VC Diversity Law applies to “venture capital companies” that meet the following two requirements. First, the venture capital company must primarily engage in the business of investing in startup ...

Registered investment advisers are subject to record-keeping requirements regarding certain written communications, and in the last several years, the U.S. Securities and Exchange Commission has increased enforcement efforts against “off-channel communications” (i.e., business-related communications on unapproved electronic devices and systems, such as texts) that it believes violate these requirements.¹ In a recent matter, on April 3, 2024, the SEC issued an enforcement action against Senvest Management LLC for violations of these rules and of Senvest’s own ...

Yesterday, a three-judge panel of the United States Court of Appeals for the Fifth Circuit unanimously vacated the Private Fund Adviser Rules adopted by the Securities and Exchange Commission (which we previously summarized) in their entirety, holding that the SEC exceeded its statutory authority in adopting the PFA Rules in August of 2023. The case was brought against the SEC by a group of industry associations that represent the interests of fund managers and investment sponsors. It is possible that the SEC will seek rehearing en banc by the Fifth Circuit or petition the Supreme ...

Fund sponsors often engage investment banking or placement firms to help raise capital or generate deal flow for their funds. In exchange, the sponsor may offer a cash fee, a piece of the sponsor’s carried interest, equity in the applicable portfolio company, or some other form of compensation. Many sponsors and advisors are unaware that these activities can trigger broker-dealer registration requirements under federal and state law. The registration process is cumbersome and expensive, but the unregistered status of a firm that engages in such activities can create serious ...

Co-investments play an important role in alternative asset investments. A “co-investment” generally is a portfolio company investment made by an institutional investor, at its discretion, alongside a sponsor’s “blind pool” investment fund. This post describes some benefits and risks of co-investments, both to investors and sponsors, and some of the commonly negotiated terms.

Co-investments offer several advantages to institutional investors compared to traditional fund investments. Sponsors often charge reduced management fees and carried interest, if ...

The short answer is no. A private investment fund (whether a venture capital fund, private credit fund, private equity fund, hedge fund, fund-of-funds or other type of non-registered fund) is not legally required to have a private placement memorandum or other offering document. Producing a high-quality PPM takes a material amount of time, work and money for a fund sponsor, many of whom are eager to avoid the exercise to focus efforts and resources on other matters. Whether a sponsor must or should prepare a PPM is driven mainly by the expectations and requirements of the potential fund ...

Loans to private investment funds based on the net asset value of their respective portfolio investments (that is, total assets of such a fund less its liabilities) have become dramatically more popular in recent years, as have similar arrangements structured as senior equity rather than debt. NAV loans have existed for more than a decade, and their increased use coincides with growth in the private investment funds industry and related expansion in demand for capital solutions. This post provides background information on NAV loans, discusses key issues for consideration by fund ...

Effective as of Jan. 1, 2024, many businesses and corporate entities, both foreign and domestic, must file informational reports on their beneficial owners with the Financial Crimes Enforcement Network under the Corporate Transparency Act. Robinson Bradshaw published an article summarizing the CTA and highlighting best practices for achieving compliance, located here. The CTA requirements are complex and allow for numerous exemptions, and the availability of each exemption depends on the specific facts and circumstances.

The following analysis considers various CTA ...