Fund Due Diligence

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Adverse selectionThe risk of ending up with the wrong manager — picking a fund on a track record or a forward-looking statement that does not predict performance, and getting sub-optimal returns or moral hazard instead.
• Continuing interestThe sponsor's or manager's own money locked into the fund — 2.5% of corpus or Rs 5 crore, whichever is lower, for Category I and II AIFs, and 5% or Rs 10 crore for Category III.
• Contribution AgreementThe agreement between one investor, the trustee and the investment manager that sets the terms on which that investor participates in the AIF — the contract that turns a commitment into units.
• Investment Advisory AgreementThe agreement under which an offshore fund takes non-binding investment advice from an on-site Indian advisor — advice, not management, which is exactly what keeps the two roles apart.
• IPEV GuidelinesThe international best-practice guidelines for valuing unlisted private equity and venture capital investments at fair value, setting out seven widely used methods for valuing a portfolio company.
• WrapperA supplement attached to a domestic fund's Private Placement Memorandum when it is distributed offshore, so the offering complies with private placement rules in the jurisdictions where it is marketed.