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- 🛠️ Investment Fund Key Terms, Part 2
🎉 Happy Friday, funds family!
Today, we have Part 2 in our many-part series walking through each term in an investment fund term sheet in detail.
Last week, we discussed 🛠️ Naming Your Entities. Today, we'll learn about a fund’s investment objective.
But first..
/ SELF PROMOTION
If you’re a sponsor (GP) raising an investment fund or syndication in private equity, private credit, real estate, or venture capital, we may be a good fit for you. We also represent limited partners (LPs) investing in funds and syndications.
Thanks for reading. Now, let’s jump into the article 😃
The investment objective is a short, simple section that describes what the fund plans to do. 📈
Here’s an example from a real estate fund:
“The Fund’s primary investment objective is to realize current income and capital appreciation by investing in, managing, and disposing of value-add multifamily properties in Texas.”
You don’t need to overthink it, but there are a few important things to consider:
This is not the place to overhype the fund with overoptimistic language. Keep it calm.
Always state that you “expect,” “target,” or “aim” to achieve your objectives.
If you’re raising a venture capital fund, make sure to explicitly mention “venture capital” in your investment objective. This is important for fund managers who want to rely on the “venture capital exemption” from the Investment Advisers Act.
Here’s an example from a venture capital fund:
“The Fund’s primary investment objective is to realize capital appreciation by investing in Series Seed and Series A rounds of private technology companies in Northern California. The Fund intends to pursue a venture capital strategy, primarily investing in direct issuances of operating businesses. However, the Fund may also invest in other venture capital funds, secondary shares of companies, and digital assets.
Finally, you could specify the target size of your investments. For example, a private equity fund might say it’s targeting companies with EBITDA of $10-20 million.
🗓️Next up in Part 3, we’ll discuss the “Fund Size” section of an investment fund’s summary of terms.
Thanks for reading, everyone.
Have a great weekend! 🙌
/ JURY TRIAL
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