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Venture Capital and Private Equity Contracting by Sofia A. Johan, Douglas J. Cumming

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Chapter 8. Specialized Investment Mandates

8.1. Introduction and Learning Objectives

Private equity funds are established with stated objectives in terms of the focus for investments. Part of the fund objectives may include the stage of entrepreneurial firm development and/or industry. Fund objectives are set out in the contract establishing the limited partnership to ensure that every partner is clear about what the objectives are (see Chapter 4). Fund managers, however, may deviate from the stated objective. This type of deviation is known as a style drift. Fund managers may style drift to increase their pool of investment opportunities, diversify the fund to minimize risks, and seek better investments as opportunities change over time (indeed, ...

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