Although traditional PE funds have arguably fared well through each of the most recent financial crises, those market dislocations have highlighted certain flaws inherent in the traditional commingled fund approach. Investors and sponsors alike felt stifled at times by commingled funds’ lack of nimbleness, particularly the need to operate in a way that suits all LPs regardless of their differing levels of sophistication or objectives. The result is that, after the 2008 global financial crisis (GFC), many large institutional investors sought to have their investments held in single investor funds (SIFs) – i.e.
, funds of one. SIFs appealed to investors seeking more authority over their funds’ strategies, terms and features. The use of SIFs grew steadily in the period following the GFC, which proved valuable during the coronavirus pandemic when those vehicles were best positioned to pursue opportunistic investments on short notice. This first article in a two-part series examines the benefits from SIFs that inured to both sponsors and LPs that stoked their rise in popularity, as well as how that growth is prompting lenders to facilitate more fund finance solutions for the vehicles. The second article will detail the two most common approaches to structuring SIFs (i.e.
, as independent entities or as parallel vehicles to a commingled fund) and issues associated with the enhanced information rights SIF investors tend to receive. See “Continuing Growth, Prevailing Approaches and Recent Trends in the Use of Separately Managed Accounts for Illiquid Strategies
” (Sep. 22, 2020).