CAIA 2018 Chapter 7

Takes place before a transaction is completed, when the decisions made by one party cause less desirable parties to be attracted to the transaction.

May trigger a for-cause removal of the GP and investments to be suspended until a new fund manager is elected or, in the extreme, the fund is liquidated.

Is the nature of LP investments, in which investors don’t know the underlying portfolio companies before committing capital.

Or grow and compete, is a phase of the life cycle of the GP-LP relationship in which the funds thrive and grow.

Refers to the practice of investors being invited by GPs to make direct investments in portfolio companies.

A phase of the life cycle of the GP-LP relationship when competition is lost.

Eschews PE funds altogether, as the PE investment program makes investments straight into a portfolio company (without intermediation), similar to a co-investment but without the input of a PE fund manager.

Defines how returns are split between the LP and GP and how fees are calculated.

Are capital calls made by GPs once they have identified a company in which to invest.

Is split into seed stage and start-up stage.

Is a phase of the life cycle of the GP-LP relationship involving the initial funds.

Is a phase of the life cycle of the GP-LP relationship when they gave up, made it or transition to new managers.

Is the stage a company is in (also called the development capital stage), which may or may not have reached profitability, but has already established the technology and market for its new product.

Arrangement may be implemented, in which fees are fully or partially netted against management fees.

Are fund managers who manage the investment of private equity funds.