In alternative investment funds, the act of managers providing investors with notice of certain events is an important but often overlooked area that governing manager-investor relationships.
The notice mechanism is essential to make investors aware of certain situations to protect their investment interests.
It’s usually up to each investor and their lawyer to determine whether the notice provisions provided in a fund’s selling documents are sufficient or whether there are other areas not covered that warrant notice by a manager.
So here are 21 notice situations to consider with private fund investing, including hedge funds, private equity, real estate, and commodity funds.
- Side Letters: A manager enters into existing or future “side letters” with preferential terms granted to other fund investors.
- Fund Terms: Changes to fund terms including fees, expenses, liquidity, and reporting requirements
- Breaches: Breaches of fund documents or fiduciary duties by a fund’s manager or general partner
- Regulatory: Non-routine investigations of a fund, its general partner or manager
- Legal Matters: Regulatory claims brought against a manager or its personnel, findings of securities law violations or convictions
- Tax Audits: IRS or foreign tax audits performed on a fund
- Key Person: Key person events are triggered.
- Investments: In the case of hedge funds, “side pocket” investment is made or contemplated.
- Redemption: In the case of hedge funds, managers suspend redemption rights or payments, “gate” or otherwise restrict redemption or suspend determination of fund net asset value.
- Changes to Fund Policies: Changes to a fund’s policies that impact investors. For example, changes to expense, valuation or allocation policies.
- Amendments: Amendments to fund documents are proposed or made or amendments are made to Form ADV filed with SEC.
- Board/Advisory Committee-Related: Board or advisory committee meetings are scheduled or board or advisory committee members are appointed or leave.
- Service Providers: Changes to service providers occur including changes to accountants, custodians or prime brokers
- Changes to Fund’s Manager or General Partner: Changes to a fund’s general partner or manager including change of control, insolvency or bankruptcy or material adverse changes to the business of a fund’s general partner or manager.
- Insider Withdrawals: Withdrawals of investment by fund “insiders” or affiliates beyond a specified amount
- Fund Reorganizations: This one is self-explanatory.
- Distribution In-Kind: Fund distributions in-kind occur or proposed to occur.
- Personnel Changes: Changes to a manager’s or general partner’s personnel including investment and operation staff
- Changes in Net Asset Value: With hedge funds, a material decline in a fund’s net asset value.
- Indemnification: Indemnification claims are made.
- Tax: Miscellaneous tax-related notices specific to an investor