Fund Information. Bridge Finance & Fund Leverage Facilities.

Purpose

In recent years it has become common practice for General Partners (GPs) to use Bridge Finance facilities within fund structures. These are used by GPs for a range of efficiency reasons including reducing the volume of drawdowns made to and from Limited Partners (LPs) and avoiding the need to draw funds from LPs for temporary investments. Some funds, typically Debt Funds and Secondary Funds, are also using Fund Leverage. However, such facilities are not universally used, nor is their use uniform from one fund to another, and disclosure on their use has typically been relatively light. Such lack of comparability and transparency makes it difficult to compare underlying performance across funds and for LPs to establish their underlying exposures in each fund.

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Requirements

Disclosure should comprise details of any Bridge Finance, Fund Leverage and other credit facilities (including borrowings that are within a fund level SPV), which may include:

• Name of the entity or entities providing the facility and whether there are any other relationships between the GP and this entity/entities (e.g. provision of co-investor loans to GP members);
• Size and duration of the facility including ability to extend or rearrange the facility during the fund life;
• Interest rate/margin, arrangement fees, commitment fees;
• Covenants, guarantees and any other similar financial liabilities arising from the facility;
• Nature of security for the lender;
• Fund Leverage (i.e. leverage that allows the fund to make investments in excess of 100% of LP commitments) should be disclosed separately;
• If no facility is in place, a statement to that effect (in the Fund Overview).

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Over the time, any asset manager who does more than plan to manage own assets faces the problem of a transparent and convenient management infrastructure.

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On a quarterly basis, the GP should disclose, either as part of the Fund performance status, as part of GP Fees, Carried Interest and Fund Operating Expenses, or alternatively as part of a separate disclosure:

• The amount outstanding at the quarter end date;
• The scheduled date(s) for the amount outstanding;
• The percentage of total undrawn commitments that this amount represents;
• The maximum amount and average the Fund had drawn over the period (calculated on a daily basis through the period) and the % of undrawn commitments these represent;
• The interest charge and fees paid for the period;
• Events of default notified to the lender, if any, and if none, a statement to this effect.

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Additional possible disclosures

• The Net IRR without the use of the facility (whether Bridge Finance or Fund Leverage);
• The number of days outstanding of each drawdown;
• A short description of how each drawdown has been used (e.g. to bridge capital calls for investment or expenses,in advance of distributions etc.);
• The expected repayment dates of any amounts outstanding;
• Other services provided in the reporting year by the credit provider, e.g. GP financing;
• Note of any other exposure of the fund (i.e. guarantees, charges, warranties, indemnities or other contingent liabilities).