Fund information

Purpose

The Fund Overview provides LPs with general information about the fund allowing them easy access to the fund’s terms and “standing data” without requiring them to consult the fund formation documents. Many GPs utilise structures which include parallel funds to meet the needs of individual LPs; however, the Fund Overview would normally be expected to cover the total fund position aggregating all parallel funds, unless there are different contractual terms which may require additional disclosure.

The Fund Overview is designed to be a one-page summary of the fund structure. Where effective disclosure is incompatible with one-page disclosure, it may be appropriate to include only a cross-reference to the fund formation documents or other sources.

Requirements

General

• Fund full legal name;
• First closing date(s);
• Final closing date;
• First investment date;
• Vintage year;
• Term (and last date when GP can call capital, if different);
• Investment period criteria and end date;
• Fund Extension terms and provisions;
• Total commitments (whole fund including parallel partnerships and GP commitment) and separate disclosure of each constituent part;
• Fund’s financial year end;
• Domicile;
• Legal form (partnership, corporate, other);
• Outline of structure (e.g., details of the limited partnership structure, co-invest vehicles, parallel vehicles, and other forms of side vehicle). Such disclosure may be appropriate here or in the capital account statement;
• Fund currency;
• General Partner/Carried Interest Partner/Manager/Adviser;
• Investor Relations contact;
• Open or closed-ended fund structure;
• Maximum investment size;
• Other investment restrictions;
• Re-investment policy/recycling of investments;
• Maximum permitted fund Bridge Finance facility and/or Fund Leverage facility as detailed in fund formation documents;
• Accounting principles;
• ESG policy and ESG restrictions, each as applicable;
• Link to any ESG reporting, if provided separately;
• Statement of compliance with the Invest Europe Investor Reporting Guidelines.

Investment focus by

• Stage;
• Sector;
• Geography.

Key economic terms of GP

• Management fees;
• Transaction and other fees and whether 100% or less will accrue to the fund. If such amount will accrue to the fund, then disclose mechanism for reimbursement such as through a management fee offset;
• Management fees provision: within/outside commitment;
• Carried interest economics (including outline of catch-up and escrow criteria).

Governance and third parties

• Auditor;
• Administrator;
• Transfer Agent (if different from Administrator);
• External legal counsel;
• Bank(s), Bridge Finance provider, Fund Leverage provider (each as applicable);
• Tax and regulatory advisor;
• Regulator of manager and regulator of Fund (if different and if applicable);
• Country of registration;
• Custodian and Depositary (if applicable);
• External valuer (if applicable);
• Alternative Investment Fund Manager (AIFM);
• Portfolio Manager (if applicable);
• External risk manager (if applicable).

Additional possible disclosures

• Website address;
• Location of head office and additional offices;
• Valuation policy including application of the IPEV Guidelines;
• Any special voting rights granted;
• Share Equalisation provisions;
• Investment Manager Co-investment economics (if applicable);
• Capital Calls Notice Terms;
• Distribution Notice Terms (if any);
• For open-ended funds, Redemption Provisions to include:
  • Lock-up Periods if any;
  • Frequency of Redemption Dates;
  • Redemption Process including any charges and gating provisions;
• Other professional advisors:
  • Fx broker (if different from bank);
  • Compliance Advisor (if applicable);
  • ESG consultant (if applicable);
  • Cyber Security consultant (if applicable);
  • Other.

Purpose

The Executive Summary gives the GP an opportunity to provide LPs with information concerning key developments and current activity in the fund over the reporting period without the need for the LP to review the whole report to discover significant items. The relevant reporting period will either be the current quarter, the year-to-date period or both depending on the circumstances of the fund.

This will enable LPs to assess at a high level the progress of the fund and its investments over the reporting period.

Requirements

Commentary on:

• New investments, including brief description of the nature of the investee’s business, key metrics (e.g., implied entry multiple, implied enterprise value, etc.) and, if appropriate, stage of investment;
• Follow-on investments, and planned further funding;
• Realisations, including key metrics and comparison with last reported fair value;
• Significant events in the portfolio, both financial and non-financial, including relevant material ESG matters;
• Overview of investment performance, including changes in fair value;
• Portfolio analysis as deemed relevant by the GP (e.g., invested capital or NAV analysed by sector and geography);
• Material opportunities for and/or risks to the performance (financial or otherwise) of the fund not included elsewhere in the report.

Where relevant:

• Significant organisational changes affecting the GP (for example, changes in the senior investment personnel, especially key person events);
• Notification of annual meeting;
• Changes in fair value policies, processes and procedures, including any change in the use of independent valuation expert;
• Changes to fund formation documents;
• Changes in the fund’s investment strategy;
• Statement of any non-compliance with any of the fund’s investment policy;
• Status of current fundraising if reporting before final close;
• Information on defaulting investors where there are implications for other investors;
• Any developments in the GP’s approach to managing ESG-related opportunities and risks in the fund (e.g., changes to ESG-related policies, strategies, and/or management systems, etc.);
• Update on major events since the period end (including material ESG incidents);
• Explanation of any significant non-compliance with the Invest Europe Investor Reporting Guidelines.

Additional possible disclosures

• A fund performance chart in the form of either:
  • Value progression chart, showing the change in value of the fund over its life, analysed into total contributed capital, cumulative distributions, and residual fund value net of management fees and carried interest; or
  • Fund TVPI progression chart; or
  • Fund Value Bridge;
• Key findings in adviser/administrator’s compliance/control report if they could significantly impact the fund;
• Commentary on the economic and market environment for the fund or its investments and any significant changes;
• Commentary on deal flow and pipeline where relevant;
• AGM date, location and any registration requirements;
• Status of fundraising for successor funds;
• Description of significant LPAC decisions, including resolution of conflicts of interest.

Purpose

The Fund Performance Status should aim to provide LPs with sufficient information to assess the performance of the fund as a whole, as well as details of the remaining commitments and the expected investment time frame.

Requirements

A summary of:

• Total commitments to the fund;
• Cumulative paid-in capital to date;
• Total unfunded commitments available for Capital Calls (analysed, if desired, between undrawn original commitments and recallable distributions);
• Cumulative management and other fees drawn down outside commitment (where not funded from commitments);
• Cumulative distributions to the investors;
• Recallable distributions, if applicable;
• Total fair value of the current portfolio;
• Total cash, borrowings, other assets and liabilities;
• Total net asset value;
• Fund Gross IRR;
• Fund Net IRR (i.e., after accrual for carried interest and fees), optional during the two years after the first investment;
• Distributions to paid-in capital (DPI);
• Residual value, net of management fees and carried interest, to paid-in capital (RVPI);
• Total value to paid-in capital (TVPI);
• Paid-in capital to committed capital (PiCC);
• Total invested in portfolio companies;
• Total additional capital commitments to portfolio companies.

Additional possible disclosures

• Comparative figures as relevant and/or value bridge;
• Best estimate of expected Capital Calls and distributions for the next reporting period;
• Total additional planned/reserved for follow-on investments;
• Guarantees made by the fund to or on behalf of portfolio companies, and their impact on fund fair value, if any;
• Net IRR and TVPI adjusted to exclude the impact of the use of bridge/credit facilities.

Purpose

A set of Financial Statements is a fundamental part of any reporting package, demonstrating good financial control and giving an overview of the performance and financial position of the fund. Such statements should be reported at the appropriate level (i.e., partnership/entity or whole fund) within the overall fund structure.

It would be typical for a manager to provide only annually a set of comprehensive financial statements that meet local regulatory requirements. However, abridged financial information will be more appropriate. This abridged financial information should be based on Fair Value but need not be in GAAP format/layout.

Requirements

Reports to investors should normally include a set of abridged financial statements for the period in question with relevant comparatives:

• Statement of comprehensive income (total return statement);
• Statement of financial position (balance sheet);
• Cash flow statement;
• Summary of any changes to the accounting and/or valuation policy.

The statements should be presented so as to allow the reader to distinguish between portfolio/investment-related matters (e.g., gross investment return) and those related to the fund structure (e.g., fees, carried interest, expenses, etc.).

Additional possible disclosures

Ideally, the abridged financial statements should allow the investor to see aggregate performance both on a whole fund basis as well as at the level of the partnership/entity in which they are invested. This is to ensure that, when read in conjunction with the investor’s capital account (as illustrated here), the investor can track information from the whole fund level down to their individual share of the fund.

Besides, the following information would be valuable if disclosed:

• Combined consolidated schedule of investments;
• Combined consolidated statement of changes in Partners’ capital;
• Financial Highlights;
• Leverage disclosure.

Purpose

Information on amounts earned by the GP from the fund and portfolio companies together with the fund operating expenses should be disclosed in order to verify compliance with the fund formation documents. In addition, management fees, transaction and other fees and carried interest arrangements are unique to each fund and such disclosure provides transparency to investors.

Requirements

The information below should be reported for the current reporting period, year to date (or last twelve months) and, if available, since inception. In addition, where a material difference has been identified between the audited accounts and the relevant report, a reconciliation of the difference should be disclosed and explained.

Amounts earned by the GP from the fund and portfolio companies

Management fees

• Management fees paid or payable to the GP by the fund should be disclosed together with the basis of calculation;

• In some funds, certain transaction fees and other service fees earned by the GP from the portfolio company (see below) are offset against the management fees either in full or in part. If this is applicable, then the disclosure of management fees should show the gross management fees paid or payable to the GP, the amount of the offset applied in respect of the transaction and other fees, and the net management fees. It should be clear from the disclosure what percentage offset applies.

Transaction and other fees

• The nature and source of all benefits and fees paid directly or indirectly by portfolio companies to the GP and/or any related entities/individuals (such as employees, operating partners, advisers or similar) should be disclosed. Typically, these items will include but not be limited to arrangement fees, underwriting fees, directors’ and monitoring fees and transaction fees (including those earned at the time of investment and sale, where relevant). The treatment of such fees will be specific to each individual fund, often determined in the fund formation documents and the reporting should show clearly the treatment adopted.

Carried Interest

• Disclosure of whether the hurdle rate has been exceeded;

• Carried interest earned on the realised and unrealised portfolio should be disclosed with a breakdown of the following items:

  • Total amount of carried interest earned from realisations, indicating how much has been distributed;

  • If undistributed carried interest is held in escrow, then the amount in question should be disclosed;

  • Total amount of carried interest payable on unrealised investments assuming they are realised at the current fair value;

  • Value of any potential clawbacks of carried interest (this is unlikely where the fund is structured with whole fund carry).

Fund operating expenses

• Disclosure of the fund’s operating expenses providing a breakdown by category as is appropriate. This would typically include expenses such as audit, tax, Portfolio Investment legal, Fund legal and Annual Investor Meeting costs. Separate disclosure should be made, where relevant, for fund formation costs, fund borrowing costs (including interest expense and fees) and aborted deal costs. (The information may be disclosed in the fund financial statements.)

 Additional possible disclosures

• Where disclosures are being made of information in accordance with the fund formation documents, consideration should be given to annotating references to specific sections of the fund formation documents where relevant;

• Transaction and other fees may also be analysed by Portfolio Investment;

• Total Expense Ratio.

Purpose

In recent years it has become common practice for GPs to use Bridge Finance facilities within fund structures. These are used by GPs for a range of efficiency reasons including consolidating the volume of Capital Calls made to and from LPs and avoiding the need to draw funds from LPs for temporary investments or to allow the GP to respond more rapidly to emerging investment opportunities. Lack of standardised information on financing facilities makes it difficult to compare underlying performance across funds and for LPs to establish their underlying exposures in each fund. To allow for such comparability, the following requirements and additional possible disclosures have been included in these Guidelines.

Requirements

Disclosure should comprise details of any Bridge Finance, Fund Leverage, and other credit facilities (including borrowings that are within a fund level SPV), which may include:

• Name of the entity or entities providing the facility and whether there are any other relationships between the GP and this entity/these entities (e.g., provision of co-investor loans to GP members);
• Size and duration of the facility including ability to extend or rearrange the facility during the fund life:
  • Facility Type;
  • Term of line;
  • Repayment;
  • Collateral;
• Interest rate/margin, arrangement fees, commitment fees, facility fee, unused commitment fee;
• Covenants, guarantees and any other similar financial liabilities arising from the facility;
• Nature of security for the lender;
• Fund Leverage (i.e., leverage that allows the fund to make investments in excess of 100% of LP commitments) should be disclosed separately;
• If no facility is in place, a statement to that effect (in the Fund Overview).

On a quarterly basis, the GP should disclose, either as part of disclosure under Fund performance status (Example 3), as part of GP Fees, Carried Interest and Fund Operating Expenses (Example 7), or alternatively as part of a separate disclosure:

• The amount outstanding at the quarter end date;
• The scheduled date(s) for the amount outstanding;
• The percentage of total undrawn commitments that this amount represents;
• The maximum amount and average the Fund had drawn over the period (calculated on a daily basis through the period) and the % of undrawn commitments these represent;
• The interest charge and fees paid for the period;
• Events of default notified to the lender, if any, and if none, a statement to this effect.

Additional possible disclosures

• The Net IRR without the use of the facility (whether Bridge Finance or Fund Leverage);
• The number of days outstanding of each draw down;
• A short description of how each Capital Call has been used (e.g., to bridge Capital Calls for investment or expenses, in advance of distributions, etc.);
• The expected repayment dates of any amounts outstanding;
• Other services provided in the reporting year by the credit provider, e.g., GP financing;
• Note of any other exposure of the fund (i.e., guarantees, charges, warranties, indemnities, or other contingent liabilities).

Purpose

Fund formation documents will typically describe the mechanisms for disclosure of related party transactions and disclosure of and resolution of conflicts of interest, which will involve reporting either to LPACs or to all LPs as appropriate.

Related party transactions in respect of fees earned by the GP are considered in the section on GP Fees, Carried Interest and Fund Operating Expenses (see above).

Any such reporting should ensure the LPAC or LPs are provided with sufficient information to judge the appropriate treatment of such matters.

Requirements

The information below should be reported for the current reporting period. References to specific sections of the fund formation documents should be made where relevant.

• Overview of related parties in line with applicable accounting standards and disclosure of nature of relationship (if not already disclosed elsewhere, e.g., Fund Overview or GP Fees, Carried Interest and Fund Operating Expenses – see above);
• Comprehensive statement of related party transactions, for example co-investment arrangements, interests in portfolio companies held by other funds managed by the same GP, significant suppliers or customers of portfolio companies controlled by related parties of the GP, fees paid by portfolio companies on behalf of the fund (if not already disclosed under GP Fees, Carried Interest and Fund Operating Expenses – see above);
• Conflicts may arise throughout the life of the fund and where not addressed in advance in the fund formation documents, will typically need to be dealt with promptly through LPAC or investor discussion. Resolution of any material conflicts by the LPAC should be disclosed to all LPs in the next quarterly report.

Additional possible disclosures

• Disclosure and quantification of impact of any proposed significant unusual, related party transaction to management fees or carried interest earned by the GP (if not already disclosed elsewhere, e.g., Fund Overview or GP Fees, Carried Interest and Fund Operating Expenses – see above);
• Rationale for engaging in such transaction (e.g., establishing why it is in the best interest of investors);
• Disclosure of any independent third-party fairness opinion (one-sided or two-sided) valuation obtained in conjunction with the related party transaction (if applicable).