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 ...
Portfolio companies of venture capital and private equity funds usually motivate key executives through compensation tied to performance upon an exit. Such structures align the incentives of the fund with those of the executives but can lead to several tax issues that warrant thoughtful consideration.
280G Background
Section 280G of the Internal Revenue Code seeks to curb excessive executive compensation triggered by a change in control. The rules apply when a C corporation experiences a change in control if certain “disqualified individuals” (including 1% shareholders ...
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Private Fund Insights provides information and legal updates for both sponsors and investors in private funds of all types.
