Array of Bespoke Fee and Expense Possibilities Offered by Single Investor Funds (Part Two of Two)

Sponsors are often eager to facilitate an institutional investor’s desire to have its own single investor fund (SIF) – i.e., fund of one – provided the allocated sum is large enough. It is a double-edged sword, however, as those investors tend to wield their checkbooks as leverage to extract highly favorable fee arrangements from their SIFs. Unsurprisingly, the nature and scope of the fee and expense provisions negotiated for SIFs are as varied and customizable as their investment strategies tend to be. This second article in a two-part series outlines some unique fee and expense dynamics currently being deployed in the SIF market, as well as guidance for how sponsors can allocate and disclose expenses to avoid potential risks. The first article detailed why investors desire SIFs’ flexible investment strategies; circumstances that can cause investments to be inequitably allocated between SIFs and commingled funds; and ways sponsors can mitigate those risks. See our two-part series on avoiding parallel fund conflicts: “New SBAI Standards and Case Study Provide Guidance for Mitigating Conflicts” (May 5, 2020); and “Specific PE, Real Estate and Private Credit Issues and Mitigation Tips” (May 12, 2020).

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