To appeal to investors and exploit investment opportunities, fund managers will often operate multiple funds at once that may even span asset classes. That practice introduces the possibility that those funds will begin accessing common resources as part of their efforts, including sharing investors, exploring opportunities in similar industries and leveraging the expertise of the same group of employees at the firm. In anticipation of that problem, sponsors need to develop sound policies and procedures for addressing those instances and properly allocating the contested items between their PE and private credit funds. The Private Equity Law Report spoke with a number of industry experts in a series of interviews on the array of issues that can arise when simultaneously managing PE and private credit funds. This second article in a two-part series describes techniques for mitigating conflicts that can arise when allocating shared investment opportunities, expenses and employees’ time between a sponsor’s PE and private credit funds. The first article
detailed how parallel investment strategies introduce risks associated with the spread of material nonpublic information and how sponsors can prevent it from tainting their investment efforts. 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).