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Defaulting Investor

A DEFAULTING INVESTOR is an investor that fails to transfer cash to a fund within the timeframe stipulated in the DRAWDOWN NOTICE What happens in the case of a default Although most DRAWDOWNS  proceed without incident, sometimes cash is not received on time. Perhaps a High Net Worth Investor happens to be on holiday or is otherwise uncontactable, and fails to see the notice so does not fund on time. If a Limited Partner doesn’t fund within the period agreed in

Distributions

A distribution is any return of funds to an investor. Typically, this comes about when a fund sells one or more of its assets (when it “exits an investment”). Which partners receive a share of a distribution will be set out in the Limited Partnership Agreement (“LPA”) and will be determined by a number of factors. The priority in which various parties receive whichever share they are entitled to of the distributable funds is called the DISTRIBUTION WATERFALL. How it

Waterfall

The WATERFALL reflects the commercial agreement between the partners in a private equity fund for the share of the proceeds of the partnership according to certain pre-set rules set out in the Limited Partnership Agreement (LPA). The rules determine how much each partner in the fund gets paid, and according to what priority. The waterfall will need to be recalculated on every DISTRIBUTION. It is also the crux of the commercial agreement between the investors (the Limited Partners) and the

Drawdown Notice

A DRAWDOWN NOTICE is the means used by fund managers to communicate the need to DRAW DOWN funds from its Limited Partners. Because capital committed to a private equity fund (or fund with a similar structure and strategy) is not transferred to the fund manager at the point of subscription (or ‘commitment’), there needs to be a mechanism for drawing the required portion of the committed capital into the fund, in order for the fund to be able to make

Hambro Perks to allow individuals to co-invest in its VC deals

Venture capital firm Hambro Perks, run by City grandee Rupert Hambro and former investment banker Dominic Perks, has opened its doors to retail investors for the first time. An innovative and interesting market development comes from Hambro Perks, which is now launching an EIS fund, administered by Mainspring, which will allow retail investors to make tax-efficient investments alongside the Hambro Perks business. With the new EIS fund, the firm aims to avoid the pitfalls which others have fallen into. While some funds

Setting up a new PE or Venture fund – permission & formalities

Parts 1-3 of this series of articles have looked at the areas where you should have conviction in order to invest the time and other resources required to launch a fund, as well as covering the fundamental cash flow and pertinent business considerations for any want-to-be fund manager. An important feature of investment management that we have not yet touched on, however, is regulation. Private equity and venture capital managers must be regulated in any market in which they plan to

EIS Association: 2017 Best EIS Custodian and Fund Administrator

Mainspring picked up the gong at the industry EIS Association awards for ‘2017 Best EIS/SEIS Custodian/Administrator’ – the inaugural year for this award. The award included categories, amongst others, for investor reporting, range of services offered, new initiatives and though leadership on the industry. On announcing the award the judge’s comments included “Mainspring have demonstrated their commitment to investing in IT infrastructure. Their willingness to be flexible to different fund types and welcoming new entrants are admirable qualities.” Stephen Geddes CEO picked up

Setting up a new PE or Venture fund – your fund as a business

Up until now, this series of articles has focused on some questions that need confident answers before it is prudent to sink the time, cash and other resources required into launching a new fund. This time we will concern ourselves with just one issue: How do I run the business side of being a fund manager? Like any business, your fund management company needs a financial plan.  You must have a clear plan as to how you will cover the costs and

Setting up a new PE or Venture fund – creating value

So, let’s fast forward to the first investment from your new fund: how are you going to improve the value of your new portfolio company? Value creation has come under increasing scrutiny since the financial crisis, 10 years ago. Even if leverage is an important component in your investment strategy, using leverage as the primary tool to generate returns is no longer sufficient. Today, successful managers are able to point to strategies and operational improvements that they have successfully used

Setting up a new PE or Venture fund – first things first

Launching a private equity fund will typically involve raising a large amount of capital from individuals and institutions, but there are many steps that need to be taken before it is time to reach out formally to potential investors with your proposition. This series of short articles aims to introduce first-time and would-be fund managers to the steps that need to be taken to launch a private equity fund. First, we will look at the tests you must subject your