By: Miles Chan, VP/GM of Insight
Whether it’s private equity or private credit, overseeing $100 million or more than $1 trillion, the pain persists. Managing an increasing number of LPAs and side letters and the numerous obligations therein is labor intensive, time consuming, and prone to human error. Asset managers with hundreds of LPs per fund and dozens of funds per year are potentially looking at tens of thousands of side letters, LPAs, and MFN elections. Even managing one fund with a few dozen side letters is a large lift for smaller teams.
To fully meet the promises made to their investors, fund managers need a clear view of their obligations across all of their funds and strategies so they can assign accountability within their organization and provide a clear, digital audit trail of compliance. Failure to do so can lead to legal action, regulatory fines, loss of investor confidence and reputational damage. Historically, fund managers have relied on ad hoc or manual processes to manage the growing number of obligations owed to their investors. These approaches lack the functionality and features to meaningfully manage large amounts of fund documentation.
At InCloudCounsel we work with a wide range of asset managers across a diverse set of asset classes, regions, and investment strategies. In conversations with more than two hundred asset managers, they all expressed the need for a dedicated solution to help them manage the increasing number of obligations owed to their LPs. In the absence of a tool built to deal with the complexities of fund documentation, we developed Insight, the first purpose-built software solution that allows fund managers to organize and manage obligations to their investors across all of their funds in one centralized platform.
Insight turns complex legal contracts into data to ensure fund managers keep their promises to their investors by:
- Hosting all obligations across funds in one centralized location.
While many fund managers are used to receiving a word document compendia of fund terms, they must manage multiple compendia to understand terms across funds. Moreover, word documents lack key functionality to allow users to search, filter, and analyze terms across funds.
- Assigning obligations to functional owners across the organization.
Complex contracts touch various people in an organization–legal, finance, investor relations, and even deal teams. Insight drives accountability by enabling users to tag individuals across departments to specific obligations and track compliance with those obligations.
- Tagging obligations (including MFN elections) to identify their true source.
Understanding the primary obligations in LPAs and side letters is not enough. Insight allows users to tag the true source of an obligation including if an LP selected that obligation from the MFN process.
- Building a comprehensive digital audit trail.
Tracking compliance with obligations in real time means there is always a finger on the pulse. With Insight you can monitor and audit obligations through digital records to verify who did what and when.
Fund documents are among the most complex set of documents for asset managers. By turning LPAs and side letters into actionable data, fund managers can save time and money while significantly reducing the risk of breaching crucial commitments to their LPs. For more information on Insight, check out the introduction video for Insight or head over to the Insight homepage.