Private Fund Insights Blog

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 ...

The Tax Court, in a victory for the IRS, recently issued an opinion holding the limited partner exception to the Self-Employed Contributions Act Tax must be construed narrowly. The court held a limited partner under state law is not automatically a limited partner for purposes of the SECA exclusion.

SECA Background

SECA imposes a tax on the self-employment earnings of individuals, which mirrors the rates applicable to wages of employees under FICA—a 12.4% rate applicable to a capped portion of earnings, plus a 2.9% rate on all earnings (with an additional 0.9% charge above certain ...

On Aug. 23, the U.S. Securities and Exchange Commission adopted the PFA Rules, rules and rule amendments under the Investment Advisers Act of 1940 that impose new requirements and obligations on private fund advisers. In previous blog posts, we provided a brief summary of the PFA Rules, discussed the new quarterly reporting requirements, analyzed the impact upon adviser-led secondaries, examined the new restricted activities rule and considered the new preferential treatment rules. This post focuses on the application of the PFA Rules to existing private funds’ contractual ...

On August 23, the United States Securities and Exchange Commission (the “SEC,” or the “Commission”) adopted rules and rule amendments (the “PFA Rules”) under the Investment Advisers Act of 1940 (the “Advisers Act”) that impose new requirements on private funds and their investment advisers. Our prior blog posts on the PFA Rules offered a broad overview of the PFA Rules’ most important changes, summarized how the PFA Rules impact registered investment advisers’ quarterly reporting requirements, examined the PFA Rules’ effect on adviser-led secondaries

Yesterday, the United States Securities and Exchange Commission (the “SEC” or the “Commission”) Division of Examinations released its examination priorities to inform market participants of the key topics and priorities that the SEC plans to focus on when conducting examinations on SEC-registered investment advisers, investment companies, broker-dealers, transfer agents, municipal advisers, securities-based swap dealers, clearing agencies and other self-regulatory organizations in the coming year.

This article summarizes upcoming examination ...

On August 23, the United States Securities and Exchange Commission (the “SEC” or “Commission”) adopted rules and rule amendments (the “PFA Rules”) under the Investment Advisers Act of 1940 (the “Advisers Act”) that impose new requirements and obligations on investment advisers to private funds. In a series of blog posts on the PFA Rules, we summarized the most notable regulatory changes, analyzed the SEC’s new quarterly reporting requirements and reviewed the PFA Rules’ impact on adviser-led secondary transactions. This post addresses the “Restricted ...