Closed‑End Funds of PE Funds: Relative Merits of Registration Options and an Infinite‑Life Structure (Part One of Two)

In recent years, there has been a steady uptick in interest among PE sponsors and investors in closed-end funds of PE funds. The vehicle offers an appealing way for investors to attain diversified exposure to PE investments, while also affording fund managers flexibility to pursue a number of different fund arrangements depending on how they decide to register the fund or structure its duration. The pros, cons and features of closed-end funds of PE funds registered under the Investment Company Act of 1940 were examined in a recent Dechert webinar featuring partners Richard Horowitz and Jonathan H. Gaines. This first article in a two-part series outlines the tenets and recent growth of the fund structure; issues with dually registering under the Securities Act of 1933; and factors in pursuing an infinite-life fund in lieu of a finite-life fund. The second article will explore tax considerations; valuation and co‑investment issues; and tips for selecting an appropriate board of directors. See our two-part series on Dechert’s and Mergermarket’s 2020 PE Outlook: “Identifying Investment and Exit Strategy Trends” (Dec. 10, 2019); and “Forecasting Fund Structures and Global Market Growth” (Dec. 17, 2019).

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