Hypothetical performance can be a powerful tool in fund marketing, offering investors a glimpse into how a strategy might perform under specific scenarios. However, the use of hypothetical performance data is heavily scrutinized by regulators, particularly the SEC, to prevent misleading claims and ensure investor protection. In this post, we’ll explore what constitutes hypothetical performance, the rules governing its use, and best practices for compliance.

Private investment funds in the United States often rely on exemptions under the Investment Company Act of 1940 to avoid registering as investment companies with the Securities and Exchange Commission (SEC). Two common exemptions are provided under Sections 3(c)(1) and 3(c)(7). While both allow funds to operate with fewer regulatory burdens, there are significant differences between these two structures. Understanding these differences is critical for both investors and fund managers.

Investing in a private equity fund offers significant opportunities for portfolio diversification and long-term growth. However, these opportunities come with unique economic factors that investors must evaluate carefully.

Hedge funds and private equity (PE) funds are both alternative investment vehicles, but they serve distinct purposes within an investment portfolio. While both aim to generate superior returns, their approaches, structures, and operational characteristics differ significantly, primarily due to the type of assets they invest in and their degree of liquidity.

A co-investment is a direct investment made alongside a private equity or other investment fund by an investor who is also participating in the fund. Typically, co-investments are offered on a deal-by-deal basis and allow investors to participate in specific transactions without the fees and carried interest typically associated with the main fund. Co-investors will invest through a co-investment vehicle that will invest on a side-by-side basis with the main fund.

Dissolving a Delaware limited partnership requires compliance with both the Delaware Revised Uniform Limited Partnership Act (DRULPA) and the fund’s governing documents.