Formation Decisions

Through a series of structured discussions with you, we will work through the following list of typical U.S. domestic fund terms to help you decide the terms appropriate for your fund and investors. These decisions frequently require a trade-off between operational flexibility on the one hand and investor control and confidence on the other. So, in general, we will address each of the following three questions as we work through the list of decisions:

 

• How much operational flexibility is necessary for your specific operation, assets and strategy?

• What is the market for each term and what do your investors require?

• What legal risks, disclosures or other legal or operational issues does the proposed term implicate?

 

Subscriptions

 

• Subscription limitations (min/max, etc.)

• Subscription marketing and use of placement agents

• GP, principal and affiliate capital commitments

• Multiple classes or modification/exemption of subscription terms for certain subscribers

 

Withdrawals

 

• Notice

• Withdrawal periods

• Lock-ups

• Withdrawal charges

• Withdrawal gates

• Partial withdrawals

• Forced withdrawals

• Withdrawal request processing

• Withholds pending audit/valuation

• In-kind distribution

• Limitations on GP withdrawals

 

Management Fees and Expenses

 

• Rate and calculation of management fee

• Management fee period and assessment

• Allocation of expenses between fund and IM

• Soft dollar policy

 

Performance Compensation

 

• Rate and calculation of performance compensation

• High water marks

• Hurdle rates

• Special situation accounts

• Clawbacks

• Escrows

 

Transparency and LP Rights

 

• LP voting rights

• Independent oversight

• Key people events

• Audit and investor reporting

• Restrictions on transfers (GP and LP)

 

Miscellaneous

 

• Side pockets

• Valuations

• Leverage

• Indemnification

• Limitations on principals’ activities, investing and time

• Choice of law and venue

• Service providers

• Risk factors