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    Jun. 26, 2025

Growing Use and Misuse of DPI Calculations to Assess Fund Performance (Part One of Two)

Of all the formulae that investors use to measure private funds, distributions to paid-in capital (DPI) stands out in many investors’ minds as one of the most straightforward. Put simply, DPI measures cash returned to investors as a percentage of what they invested in the fund. Investors concerned about the reality behind marketing hype, their cashflow or simply having liquidity to invest in a successor fund often value DPI as a way to discern a manager’s ability to actually return money to investors. In reality, however, DPI is not nearly so simple to use. When considered in isolation from other data, DPI is flawed at measuring how skillfully a GP is managing investors’ money and overall fund performance – especially given variables such as fund maturity and investment strategy. At certain points in a fund’s life, expecting any DPI at all would make little sense. This first article in a two-part series explains how DPI is calculated, how it contrasts with other performance metrics, its limitations and its growing popularity among investors. The second article will examine ways that DPI calculations can be distorted – both intentionally and unintentionally – to juice a fund’s performance numbers relative to reality. For more on how DPI can be distorted, see “LP Concerns and Common Misconceptions About the Rise of ‘Synthetic’ Distributions (Part One of Two)” (Jul. 11, 2024).

Analyzing the Revamped Form PF and Related SEC Staff FAQs

Among their other regulatory obligations, private fund managers that are SEC-registered investment advisers may be subject to Form PF reporting obligations pursuant to Rule 204(b)‑1 under the Investment Advisers Act of 1940. Since its adoption in 2011, Form PF remained relatively unchanged. Recently, however, the SEC renewed its focus on the form, amending it three times since 2023 and bringing enforcement actions against investment advisers for Form PF violations. Following the amendments to the form, the SEC staff published updated and new responses to frequently asked questions (FAQs) in late 2024 and early 2025. The updated FAQs highlight many of the significant changes to Form PF introduced by the amendments and illustrate how certain Form PF filers may need to revamp their approach to completing the form, which managers should promptly address regardless of the SEC’s decision to extend the compliance date for the latest amendments until October 1, 2025. In a guest article, Morrison Foerster attorneys Kelley A. Howes and Aaron J. Russ analyze the FAQ changes most relevant to PE sponsors, including why those that advise – or that have a related person that advises – fund-of-funds, parallel fund structures, parallel managed accounts or master-feeder arrangements need to carefully reconsider their Form PF reporting obligations. See “Potential Areas of Scrutiny in Future SEC Examinations of PE Sponsors” (Jan. 9, 2025).

Preparing to Comply With FinCEN’s AML/CFT Rules

In August 2024, the Financial Crimes Enforcement Network (FinCEN) adopted final rules (AML Rules) that will impose the anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements of the Bank Secrecy Act of 1970 on certain investment advisers. Although a related rule proposal on customer identification programs has not been finalized yet, the AML Rules are scheduled to come into effect on January 1, 2026. To help investment advisers prepare to comply with the AML Rules, EisnerAmper and Lowenstein Sandler recently presented a webinar, entitled “What Investment Advisers Need to Know: New AML/CFT Compliance Requirements,” which featured Lowenstein Sandler partners Scott H. Moss and Robert A. Johnston, as well as EisnerAmper partner Louis Bruno and managing director Isatou Smith. This article summarizes key takeaways from their discussion. For additional insights from Lowenstein Sandler, see “Limited AI and Alternative Data Adoption for Legal and Compliance Efforts, According to Survey” (May 1, 2025); and from EisnerAmper, see “What Investors Should Look for When Scrutinizing PE Sponsors’ Audits During ODD” (Feb. 20, 2025).

To Roll or To Sell: Practical Tips and Pitfalls for LPs in Continuation Vehicles (Part One of Two)

The PE secondaries market is booming, and much of its growth – by nearly one-third in the year ended October 2024 – is driven by sponsor-led secondary vehicles. Those, in turn, are led by continuation vehicles, in which a new fund managed by a GP acquires one or more assets owned by an older vintage fund rather than selling them through traditional exit routes. LPs have generally shunned continuation vehicles. When presented with the resulting roll/sell election, they often choose the liquidity of the latter. That may be changing, however, as continuation vehicles become more common and familiar. Still, it is not easy for LPs to roll their existing fund investment into a continuation vehicle, as it requires them to navigate information and logistical hurdles. Those topics were covered in a Morgan Lewis webinar featuring partners John D. Cleaver and Carrie J. Rief. This first article in a two-part series describes the increase in LP interest in rolling into continuation vehicles, the steps involved in the transaction process and factors LPs should weigh when evaluating roll opportunities. The second article will detail issues LPs should diligence when scrutinizing continuation vehicles, as well as the election options available to LPs. See our two-part series on hybrid M&A single‑asset transactions: “Notable Benefits From Parallel M&A and Continuation Fund Deals” (Nov. 17, 2022); and “Complications to Consider and Negotiating Points to Navigate” (Dec. 1, 2022).

Outsourced CCO: Perception and Trends

The proliferation of outsourcing in the investment management space is apparent, with reliance on third parties for everything from IT to chief investment officers and everything in between. This guest article by Sean R. Wilke, senior managing director and head of growth strategy for global fund and investor services company IQ‑EQ, explores the newfound popularity and acceptance of the outsourced CCO, as well as the evolution and catalysts driving this industry trend. For more insights from Wilke, see “Sanctions 101: Their Impact on Private Fund Investors and Investments (Part Two of Three)” (Sep. 20, 2022).

Paul Weiss Adds New Head of LA Investment Funds Group

Steve Y. Yoo has joined Paul Weiss as a partner and head of the firm’s Los Angeles investment funds group. He focuses on the structuring, formation and operation of PE funds, as well as continuation funds and GP‑led secondary transactions. See “Continuation Vehicles Survey Highlights Increasing Convergence of Some Terms, Vicissitudes Among Others” (May 29, 2025); and “Unique Features of GP‑Led Private Credit Secondaries Funds” (May 15, 2025).

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