Utilize Corporate Sponsor Credit to Fund Your Private Equity Fund Non-Recourse Loans

In recent years, investment managers sponsored by established corporate enterprises (Corporate Sponsors) and corporate sponsored funds (CSFs) have been established with increasing frequency across a range of sectors, markets and geographies, buoyed by the drive of leading institutional fund investors (Investors) to partner with market leaders and deploy significant amounts of capital into select opportunities that traditional channels may not offer.

CSFs present a range of advantages for Corporate Sponsors and Investors, including their ability to support a Corporate Sponsor’s key strategic objectives and secure high-upstream investment opportunities for Investors.

Corporate Sponsored Funds

CSFs are private funds sponsored by an investment manager that is affiliated with Corporate Sponsors carrying on a core business other than investment management. At one level, CSFs reflect established capital markets norms, because many of the world’s leading investment managers have, at one time or another in their development, been affiliated with diversified enterprises. What is novel about CSFs is their ability to address Investors’ capital deployment and deal flow needs in harder-to-access strategies, including capital-intensive strategies such as infrastructure, credit, pharmaceuticals, energy, telecommunications and real assets through asset-level expertise and focus derived from the institutional capabilities of a Corporate Sponsor. As a result, CSF has the unique ability to offer a unique deal flow to private equity investors.

CSF benefits from the unique advantages of a private capital structure in supporting and accelerating the growth and development of the businesses of corporate sponsors. They also utilize platforms provided by corporate sponsors. Corporate sponsors are typically large, well-known, mature companies with core businesses that lend themselves naturally to large capital deployments. CSFs are typically managed by a corporate sponsor's exclusive subsidiary (Corporate Relations Manager). The subsidiary will have expertise in surgically directing CSF capital to the corporate sponsor's preferred growth strategies, business units or divisions, building support relationships through a long-term, programmatic approach. Investor. This opportunity for strategy segmentation by CSF is important for a corporate sponsor to implement key elements of an overall strategy while managing balance sheet risk by controlling the level of capital contribution to her CSF. can represent the way

Corporate Sponsored Funds leverage the unique advantages of private capital structures by supporting and accelerating the growth and development of their corporate sponsors' businesses.

Benefits for Affiliate Managers and Their Corporate Sponsors

Like other private funds, CSF provides attractive income to corporate sponsors primarily through management fees and a portion of the operating interest paid by corporate sponsors through his CSF. can produce. Additionally, by allowing corporate sponsors to share a portion of these management fees and interest earned, CSF helps monetize the insights of corporate sponsors' internal investment teams.

CSF also provides corporate sponsors with capital guarantees for their significant strategic purposes on favorable terms compared to traditional equity and debt funding sources. CSF avoids the undesirable effects (and costs) of over-reliance on debt and equity issuance, while maintaining control of strategy and expansion of quality strategy.

CSFs also enable Corporate Sponsors to overcome balance sheet and capital constraints that may make it more difficult to achieve strategic and commercial objectives. CSFs can provide relatively stable, long-term capital that compares favorably to other capital sources, and aids in the conservation of balance sheet capital. In addition, CSFs may be structured so as to be consolidated or deconsolidated for corporate finance, debt covenant, accounting and balance sheet purposes, which helps preserve flexibility for the Corporate Sponsor to pursue key objectives.

Benefits for CSF Investors

CSFs can facilitate Investor expansion of direct investment programs over time, including through portfolio company exits by CSFs to Investors, while mitigating Investor perceptions of new sponsor risk by brand backing, performance information, technical expertise and well-developed support functions. To this end, leading enterprises are often well positioned to offer significant, prespecified portfolios of closing assets, attractive co-investment opportunities and ongoing, large-scale deal flow to Investors through CSFs.

CSFs also offer Investors governance structures that are familiar and reflective of Investors’ existing relationships with other private funds, including those run by established, multistrategy managers not affiliated with Corporate Sponsors. Governance and alignment mechanisms for CSFs typically rest on best practices and negotiated terms common to many private funds, such as independent investment committee bodies, carefully defined investment guidelines and a role for the CSF’s Investor advisory committee, as well as transaction-specific governance provisions and mechanisms. In this way, CSFs offer leading Investors privileged access to preferred deal flow within a Corporate Sponsor’s investment, development or acquisition pipeline. Utilizing best practices in conflict management to unlock access to investment opportunities available through the Corporate Sponsor, CSFs, like other private capital structures, can serve to create and strengthen long-term relationships between Corporate Sponsors and Investors that are protected by the fund governance norms familiar to Investors.

Conclusion

As leading corporate entities seek to monetize in-house investment acumen and focus on key business lines to drive growth and market share, preservation of balance sheet capital and targeted partnering with Investors will remain critical. CSFs provide Corporate Sponsors with a unique opportunity to combine the inherent flexibility of private capital transactions with the advantages of sponsor-favorable market norms to define the future of their key business lines.