The COVID-19 pandemic has created a series of unprecedented challenges for fund sponsors and general partners (collectively, GPs) of closed-ended private funds in relation to the capital raising and operation of their funds.
These are some of the key issues that GPs should consider during these times:
- Fundraising. Timelines will certainly be impacted by the current pandemic. The significant market dislocation brought about by COVID-19 will result in some GPs considering alternative investment options such as investing in distressed opportunities. GPs should also expect significant constraints as governments focus on addressing the pandemic.
- Fund Operation. GPs need to be creative in addressing operational constraints and difficulties. GPs should also be more proactive in reaching out to prospective investors, as well as complying with BCP requirements and regulations.
- Fund Investment. GPs with a fund nearing the end of its investment period and capital to deploy will need to check whether or not there is sufficient flexibility in the fund’s constitutional document to extend the investment period. Given anticipated financial constraints, GPs should also explore other available sources of finance.
This guide goes into more detail around key issues and factors currently at play. The situation is currently developing, and more briefings will be released once they become available. covering open-ended funds and other areas of the private funds sector.