Private Equity and Venture Capital Funds

ALPS Fund Services

Description

Private Equity and Venture Cap Funds continued calls need to be planned comfortably in advance so that there’s enough cash kept on hand to meet normal calls from underlying funds. If a PE or VC FOF does not keep an adequate cash cushion, it will need to either establish a line of credit or closely monitor its underlying funds with the intent of staying ahead of the game. Because PE and VC FOFs often do not include carried interest and preferred return calculations – so there is no financial motivation to minimize the FOF cash balances – they will usually have just a few large cash calls that will keep them comfortably ahead of the needs of underlying funds. Offshore Funds One notable difference between an offshore PE or VC fund and a “normal” offshore hedge fund is that the offshore PE or VC fund will most often be structured as a partnership or some other structure that elects to pass its tax effects through to investors. Because of the expected long-term holding periods of securities, pass-through taxation will likely be more attractive to the manager, plus, with a single offering period, the complexity of shares and series accounting is unnecessary.

Accordingly, reporting to investors will likely be in terms of account values, rather than net asset values per share or unit. This material has been prepared by ALPS for general informational purposes only. It does not constitute tax, legal or investment advice, and is presented without any warranty as to its accuracy or completeness or whether it reflects the most current developments. ALPS does not provide tax, legal or investment advice.

You are urged to consult your own tax, legal and investment advisors. 5 © 1994 - Present ALPS e-mail e l e m e n t s @ a l p s i n c . c o m web w w w. a l p s i n c .

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