Category: Private Investment Funds

Analysis of a 3(c)5 Fund

Dodd-Frank created a new legal definition for a “private fund” as pooled investment vehicles that are excluded from the definition of “investment company” under the Investment Company Act of 1940 by section 3(c)(1) or 3(c)(7) of that Act. Under 3(c)(1), the main limitations are that you have one hundred or fewer holders of beneficial interest

Another One with Improper Fees Charged to a Private Fund

For years, the Securities and Exchange Commission has been focused on fees and expenses allocated by a private fund managers to their sponsored funds. The latest to be caught improperly allocating fees and expenses is Potomac Asset Management. First, Potomac improperly charged $2.2 million in fees to the fund for services provided by Potomac to

The One With a Private Fund End-Around

Bradway Financial provides traditional investment advice. More than 75% of its clients are individuals that are not classified as high net worth. It’s owner, Brian Kimball Case must have had big dreams and wanted to also invest in private equity and run a private fund. That would require some additional compliance costs that he wanted

ILPA Guidance on Subscription Lines of Credit

The Institutional Limited Partners Association (ILPA) released guidance regarding the use of subscription lines of credit facilities by private equity funds. ILPA outlines the risks and potential impact on limited partners. As with most potential conflicts, ILPA recommends better disclosure and greater clarity for their use. Subscription lines of credit are a great tool for

Financial Choice Act Passes the House

While the political lens was focused on the James Comey testimony, the House of Representatives passed the Financial Choice Act. The bill is big change to many of the Dodd-Frank. For private funds, the most interesting section is: TITLE IV—Unleashing Opportunities For Small Businesses, Innovators, And Job Creators By Facilitating Capital Formation. The Financial Choice

The Positives and Negatives of A Subscription Credit Line

I came across two competing narratives on the use of subcription credit facilities for private equity funds: (1) Howard Marks of Oaktree Capital published a memo on subscription lines of credit for closed-end funds and (2) Eileen Appelbaum’s Private Equity’s Latest Con. Unlike hedge funds, private equity funds call capital from limited partners over time as investments

Headline Risk

On Thursday, The Wall Street Journal published an article on conflicts between the top executives of some private equity firms and their personal investments: “Fund Kings Open Family Offices.” The article focused on two aspects of the executives’ wealth management: (1) distractions from activities outside the funds and (2) conflicting investments with the funds. On

Financial Choice Act 2.0 for Private Fund Managers

The Republican agenda is moving ahead to unwind much of the Obama Administration’s legislative and regulatory achievements. The first attempt to repeal the Affordable Care Act failed. Next up is raising the debt ceiling, tax reform and Dodd-Frank appeal. (I question how much Congress can take on at one time.) Jeb Hensarling, Chairman of the House

Financial Choice Act

Congress is currently occupied with health care. That is just one item on the agenda for the Republican leadership in Congress and President Trump. All have mentioned in one way or another to undo some of the evils of Dodd-Frank. The big questions is how long will it take to move the American Health Care

Co-Investments and the SEC

Last year, regulators from the Securities and Exchange Commission raised concern about co-investments. The statements were vague about what was bothering the regulators. Co-investments allow a private equity to lower its exposure to an investment and give others an opportunity to invest along side the fund at a discounted rate. It can be an opportunity to