“Terms are important but seldom the primary drivers of investment decisions. As they say, terms never make a poor firm look good nor make a good firm unattractive.”
—Kelly Williams, President of GCM Grosvenor Private Markets (formerly Managing Director and Head, Customized Fund Investment Group, Credit Suisse, Fund of Funds)
A typical fund-offering document, called the private placement memorandum (PPM), includes the fund's investment strategy, the fund manager's background and expertise, and market opportunity. The fund's limited partnership agreement (LPA) is the document that contains legal terms that describe the fund control mechanics, management, investment, and distribution of returns.
A short summary of key terms is usually included in the fund documents and are presented here in Table 13.1.
TABLE 13.1 Key Fund Terms
|Fund size||$100 million|
|Commitments||Institutions: $5 million minimum|
|Individuals: $1 million|
|Investment Size||Approximately $1,000,000 to $2,500,000 per initial investment. Maximum investment per company capped at 10% of the fund or $10,000,000.|
|Fees||2.5% reducing by 0.5% each year after year 5|
|Industry focus||Technology (enterprise, consumer, security) and digital health|
|Investment stage||Seed-stage companies with committed management teams and proven commercial viability|
|Geographic focus||Silicon Valley, primarily|
|Term||10 years. The fund will invest aggressively ...|