Funds: Private Equity, Hedge and All Core Structures

Chapter 10

Investment Manager Structures

10.1 INTRODUCTION

The manager is retained by the fund to invest and divest on behalf of the fund and to provide overall control of the operation of the portfolio assets. It is staffed by a team of executives with investment experience and sufficient track records to attract investors to a fund. The legal structure of the manager will depend on commercial and regulatory considerations but has recently been a limited liability partnership or a limited liability company.

If the fund is domiciled offshore, the manager might also be domiciled offshore, and advised by a regulated investment adviser onshore, or based where the principals or team are located. This chapter assumes that the manager is located in the UK, the US or within the EU.

10.2 GENERAL PARTNER IN LIMITED PARTNERSHIP STRUCTURES

In a typical limited partnership structure there is only one general partner, which is often an entity controlled by the manager. The general partner has responsibility for the decisions of the fund, can make legally binding obligations and has unlimited liability for the debts and obligations of the fund. The limited partners will seek to avoid intervening in the operation of the fund in order to avoid accidentally attaining general partnership status and therefore assuming unlimited liability for the debts of the fund.

The general partner will usually be a subsidiary organization of the fund adviser or manager. It will have a legal structure (such as ...