CHAPTER 13 Terms of Investment: The Limited Partnership Agreement

“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.

KEY TERMS

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 ...

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