A THOROUGH UNDERSTANDING OF PRIVATE EQUITY
RETOUR SOMMAIRE
A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2010
MAIN ACTORS AND STRUCTURES
2.
MAIN ACTORS AND STRUCTURES
2.1
Roles and responsibilities of main actors
The private equity business model involves different players. Figure 21 displays the main parties generally involved in a private equity fund: The GP (private equity firm/manager), the LPs (investors), the placement agent (if different from the GP), legal and tax advisers, and the various service providers (depositary, administrative agent, registrar, transfer agent and auditors). Their respective roles and responsibilities are described hereafter.
Figure 21: Main players of a typical private equity fund
Other advisers
Fund management
Fund m nag ment
Legal adviser
External adviser
Investment committee Investment co mittee
Tax adviser
Regulatory
Private equity house (General Partner/Investment manager)
Placement
2.1
agent
Regulator
Selection Monitoring Development Mgt + Perf. fee
• • • •
• Supervision • Custody • Fund admin. • Audit
Limited Partners (Investors)
Depositary bank
Insurance companies
Administrative agent
Private equity fund
Pension funds
Registrar and transfer agent
Banks
• Fund raising/Commitments • Capital calls • Distribution
• Capital calls • Investments • Divestment • Distribution
Business angels
Auditor
High net worth individuals
Corporates
Private equity fund
Private equity fund
Funds of funds of unds
Family offices
DI
DI
DI
DI
DI
DI
Sovereign wealth funds
Portfolio
DI: Direct investment
Source: Adapted from Ernst & Young, 2009
General Partner
2.1.1
The term GP refers to the private equity firm as an entity that: • Establishes investment funds that collect capital from investors and reinvest this capital in investee companies; • Is legally responsible for managing the fund’s investments and, in theory, has unlimited personal liability for the debts and obligations when the fund is set up as a limited partnership. It should be noted that in practice, GPs use specific structuring to avoid assuming this unlimited personal liability. The GP is also responsible for selecting the depositary, the administration agent, the regis- trar and transfer agent and other such agents as deemed appropriate. Furthermore, the GP shall provide quarterly reports on its activities and investments to all shareholders.
A thorough understanding of PE | page 35
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