Managing Private Funds in a Volatile Market: Interacting With Investors, Lenders, and Regulators

Description

Private investment funds and their investment managers are under increasing scrutiny in a variety of ways. Managers of both closed-end and open-end funds should continually assess fund operations and determine the proper steps to take concerning their investors and lenders.

Fund managers should review private placement memoranda, partnership agreements, or other operating agreements; investment management agreements; subscription documents; and related documentation to understand the impact of proposed new SEC rules, including the standard of care imposed on them. In light of recent economic predictions, they should determine when distributions to investors are required, when they can be suspended or delayed, when reserves may be held, and when alternatives to cash may be distributed.

In addition to addressing concerns about a fund's investor relations and governance, the manager will need to monitor the fund's portfolio and the possible impact of international sanctions on the markets in which each fund invests, better understand their fee structure and expense provisions, and become familiar with new marketing rules and potential new reporting requirements.

Funds relying on subscription and other lines of credit will want to be in close contact with lenders to ensure there are no unexpected interruptions in their ability to draw down on lines and access capital to make investments, fund expenses, or otherwise operate their funds. Responding to routine or special inquiries from the SEC or other regulatory bodies should be dealt with a special focus on the SEC's enforcement priorities. And special considerations will apply in the context of a fund under duress or dealing with distressed investments.

Listen as our authoritative panel examines these and other fund management issues in the current environment.