THE MODERN FUNDRAISER a Guide to the Choices, Vehicles and Structures Available for Private Alternative Asset Fund Managers and Their Investors
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January 2016 • www.privatefundsmanagement.net FINANCE • LEGAL • COMPLIANCE • OPERATIONS • TAX THE MODERN FUNDRAISER A guide to the choices, vehicles and structures available for private alternative asset fund managers and their investors Published in association with: 17270 US Compliance Guide Advert_Layout 1 17/11/2015 14:33 Page 1 Edited by Charles Lerner, Fiduciary Compliance Associates THE US PRIVATE EQUITY FUND COMPLIANCE GUIDE VOLUME III Essential guidance on SEC compliance priorities This guide is a vital source of intelligence from the industry’s top lawyers and compliance professionals on what advisers need to know about the SEC's heightened focus on the private equity industry. Topics covered include: • Allocation of expenses and transaction fees • When should an adviser register as a broker-dealer • Disclosures and investor due diligence • Valuation • Marketing in the US and EU • Cybersecurity • SEC enforcement investigations and actions • Chief compliance officer liability …and much more AVAILABLE NOW Order your copy of this essential title today: privateequityinternational.com/compliance3 [email protected] London: +44 (0) 20 7566 5444 New York: +1 212 633 1073 Hong Kong: +852 2153 3848 SPECIAL OFFER TO SUBSCRIBERS: Order your copy today quoting SUBBK15 and receive a 15% discount editor’s letter Editor, pfm Nicholas Donato Tel: +1 212 937 0385 [email protected] Reporter, pfm Katherine Bucaccio Tel: +1 646 545 4430 [email protected] Contributor Claire Coe Smith All hands on deck Design and Production Manager Ethan Byun Today’s fund managers are expected personnel, placement agents and senior Tel: +1 212 633 2906 [email protected] to be able to accommodate a range of managers will continue to manage the requirements from investors wanting process through careful coordination, Head of Advertising Alistair Robinson exposure to alternative investments, but but everyone at the firm now has a role Advertising Manager may be reluctant to sign up to many of to play, including those responsible for Anthony Hackett the orthodoxies of the limited partner- tasks related to compliance, finance, tax Tel: +44 207 566 4273 [email protected] ship fund structure. and administration. Subscription Sales In order to map out the choices, ve- Throughout these pages, we provide EMEA hicles and structures being adopted in readers an overview of the fundraising Alexis Savvides Tel: +44 207 566 5458 today’s buoyant fundraising climate, environment, and subsequently drill [email protected] pfm partnered with global law firm down into key fundraising issues that Asia Pacific Proskauer to produce this special report warrant deeper analysis and discussion, Brix Sumagaysay Tel: +852 2153 3848 on what it takes to successfully raise a including the challenges of managing [email protected] fund today. an oversubscribed fund – a nice problem Americas Regulations including Dodd-Frank to have, but one fraught with investor Andre Anderson Tel: +1 646 545 6296 in the US, and the Alternative Invest- relations risks (p.23); distributing co-in- [email protected] ment Fund Managers Directive in vestment opportunities to keen LPs Customer Services Europe, have drastically changed the (p.26); and knowing where crucial part- Fran Hobson Tel: +44 207 566 5444 rules of the road. Hazy concepts like nership terms have moved now that the [email protected] “reverse solicitation” and what it means so-called pendulum of power is swinging An Nguyen to be a SEC-registered advisor deserves back in GPs’ favor (p. 13). Tel: +1 212 645 1919 [email protected] managers’ careful consideration before While the demands and complexi- For subscription information please visit distributing marketing materials and ty of fundraising today is a challenge, www.privatefundsmanagement.net. ultimately securing commitments. increased regulatory attention and in- CCOs have always been a part of the vestor understanding of the asset class Group Managing Editor Amanda Janis fundraising process, but are increasingly will be beneficial for the industry long- [email protected] expected to navigate GPs through these term. And with special reports like these, Editorial Director new, choppy regulatory waters. we aim to be another so-called hand Philip Borel [email protected] Heightened investor due diligence is on deck. Head of Research & Analytics another trend. LPs are requesting CFOs’ Dan Gunner time to discuss budget numbers, IT [email protected] security and the firm’s reporting capaci- Happy reading, Publishing Director Paul McLean ties. As stewards of the back-office, CFOs [email protected] are expected to speak confidently about Group Managing Director accounting software, wire transfers and Tim McLoughlin [email protected] other operational matters to visiting LPs. Managing Director – Americas I could go on, but the point is this: Nicholas Donato Colm Gilmore fundraising is increasingly an “all hands Editor, pfm [email protected] on deck” exercise given the various [email protected] Managing Director – Asia Chris Petersen factors investors consider before mak- [email protected] ing a commitment. Investor relations January 2016 • THE MODERN FUNDRAISER • www.privatefundsmanagement.net 1 contents • JANUARY 2016 • THE MODERN FUNDRAISER p. 6 on the record 5 Thepower of commitment Ridgemont Equity Partners partner Travis Hain tells pfm how the firm managed to close its second offering in only seven months 22 Cutting through the red tape Despite the challenges of AIFMD and emerging marketing rules, managing partner Neil MacDougall and Silverfleet Capital sailed past their hard-cap on Fund II 29 Proving your partnership Mike Arpey of The Carlyle Group expert commentary features gives the inside scoop on how to handle investor relations at a firm 3 Meet the modern fundraiser 6 Better, faster, stronger juggling multiple fundraises Proskauer’s Nigel van Zyl presents A panel of fund formation thought some of the current challenges leaders discusses what it takes to facing fundraisers today – and how thrive in an increasingly complex p. 17 successful GPs are overcoming them fundraising landscape 13 At the negotiating table: 17 Reading the fee leaves Ts & Cs that require attention Will the recent hype around Proskauer lawyers Michael fee transparency actually move Suppappola, Edward Lee, Lewis existing market terms on fees Phillips and Andrew Shore dissect the and expenses? top terms receiving careful scrutiny 20 CalSTRS speaks out on fees 30 Proskauer Head of private equity Meet the Private Investment Funds Margot Wirth talks portfolio Group at Proskauer monitoring fees and today’s market challenges p. 23 23 Careful what you wish for Oversubscription may seem like a fundraiser’s dream, but the reality presents some IR complications 26 Finding what works for you GPs are coming up with new strategies to keep up with investor demand for co-investment opportunities ® New York: 16 West 46th Street, 4th Floor / New York, NY 10036-4503 / +1 212 633 1919 / Fax: +1 212 633 2904 • London: 140 London Wall / London EC2Y 5DN / +44 20 7566 5444 / Fax: +44 20 7566 5455 • Hong Kong: 14/F, Onfem Tower / 29 Wyndham Street / Central, Hong Kong / +852 2153 3240 / Fax: +852 2110 0372 • PFM is published 12 times a year. To find out more about PEI please visit: www.thisisPEI.com • Printed by Hobbs the Printers Ltd / www.hobbs.uk.com • © PEI 2016 • No statement in this magazine is to be construed as a recommendation to buy or sell securities. Neither this publication nor any part of it may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system, without the prior permission of the publisher. Whilst every effort has been made to ensure its accuracy, the publisher and contributors accept no responsibility for the accuracy of MIX the content in this magazine. Readers should also be aware that external contributors may represent firms that may have an interest in companies and/or their securities Paper from mentioned in their contributions herein. • Cancellation policy: you can cancel your subscription at any time during the first three months of subscribing and you will responsible sources receive a refund of 70 per cent of the total annual subscription fee. Thereafter, no refund is available. Any cancellation request needs to be sent in writing (fax, mail or FSC® C020438 email) to the subscriptions departments in either our London or New York offices. expert commentary • OVERVIEW The days of having only to think about a fundraising once every three or four years are long gone ing relationships with investors and potential investors have to juggle many competing demands and requirements. The days of having only to think about a fundraising once every three or four years are long gone. In the current fundraising environ- ment investor relations professionals are constantly “fundraising”, developing and enhancing relationships with their investor base and seeking to build con- nections with new investors, coupled with anticipating where new sources of capital are likely to come from and The modern fundraiser: prepared to meet new challenges head-on which sources are likely to dry up. The importance of having an investor base that is diverse not only geographically, Meet the modern fundraiser but in terms of investor type was high- Successful fund managers are identifying, reacting and lighted following the global financial ultimately overcoming a plethora of new challenges presented crisis, when many of the banks that had been both significant and loyal inves- in today’s fundraising environment, writes Proskauer partner tors for many GPs disappeared. Nigel van Zyl The modern fundraiser has to give careful thought to fund terms, those successful fundraising is the partners manage the relationships with that will remain the same, and those lifeblood of any private fund their investors has radically evolved; that will change, as well as where “the management business.