Bridget Barker Chair of the Board, Mainspring Fund Services An investment fund is an arrangement, usually managed by a third party, which allows participants to invest in one or more assets and share the returns and the risks of the underlying investments. A fund structure is typically used so that each investor can take a…
There are two very different definitions of this term, which is used widely in investment and fund management: In the hedge fund and broader investment industry, the term refers to the decline, in percentage terms, between an investment’s previous peak and trough valuations; the greater the drawdown, the greater the fall in value In the…
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…
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…
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…
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…