Subscription and Other Financing Facilities Provide Liquidity and Flexibility to Private Funds but Require Advance Planning by Managers

In order to quickly act on investments, instead of waiting for investors to fund capital calls, private equity and other private funds are turning to subscription credit facilities for necessary liquidity. Along with other types of fund financing facilities, subscription credit facilities are becoming more prevalent in the asset management industry. To facilitate the execution of a subscription facility, however, a manager must make certain preparations, particularly at the outset of the fund. In an interview with the Hedge Fund Law Report, Zac Barnett and Liz Soutter, partners at Mayer Brown, discussed subscription and other financing facilities used by funds. In the first article of this three-part series, Barnett and Soutter examine the prevalence of subscription facilities in the asset management industry, investor response to these structures and primary considerations for managers anticipating entering into such a facility. The second article reviews the evolution of other types of financing facilities in the current market, including fund-of-fund facilities, portfolio acquisition facilities and general partner support facilities. The third article focuses on market, structuring and operational considerations for managers when establishing financing facilities. For more on financing options for private funds, see “How Can Private Fund Managers Use Subscription Credit Facilities to Enhance Fund Liquidity?” (Apr. 4, 2013).

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