Results for the Fund-Level Debt & Portfolio Exposures Policy Topic


We would like to thank everyone that participated in the recent Fund-Level Debt and Portfolio Exposures policy topic.

As a reminder, this policy topic focused on appropriately reflecting portfolio exposures in cases where fund-level debt is used by the General Partner. The feedback from 87% of the respondents confirmed that the amount invested into the company, property, etc. should reflect the entire amount of capital, independent of whether or not it was funded by a capital call or the fund’s credit facility (e.g. subscription line of credit). Similarly, the valuation of the holding should reflect the entire position owned by the fund no matter how it was funded.

The rationale for this approach is that ultimately the fund and its Limited Partners are not only exposed to the portion funded by capital calls but to the entirety of the position, which should be reflected in the holdings data in order to accurately measure portfolio exposures.

The remaining 13% of the respondents expressed concern that this approach might limit their ability to compare their capital account to the aggregate valuation of the underlying holdings. The good news here is that the proposed policy will not limit the ability to conduct this type of comparison so as long as balance sheet items are included in the analysis. More specifically, fund-level debt will be reflected with a negative valuation, thus reducing the aggregate valuation of all of the holdings. That said, attempting to ‘reconcile’ between a capital account and the aggregate valuation of the holdings will always face natural limits since they represent different perspectives (e.g. gross vs. net).

Amanda VanNess