By Georgia Dennehy and Bryan Terliatan
Determining where and how to invest your money is a big decision and requires careful consideration. This can be a daunting experience particularly when it comes to understanding the various types of documentation involving investment opportunities. In this article we will define the various types of documentation that accompany investments, the purpose they serve and what to look out for.
Pre-investment documents
Before deciding to invest, there are a couple of key documents you should review thoroughly to make an informed decision. These documents are the Information Memorandum (IM) and the Fund Flyer.
Information Memorandum
An Information Memorandum (IM) is the most comprehensive document prepared by an Investment Manager. The IM explains the investment opportunity, the key terms and risks as well as the management parameters of the investment. It is similar to a Product Disclosure Statement (PDS) that accompanies financial products such as bank accounts, credit cards or superannuation accounts. The IM contains all the information prospective investors need to make an informed decision of whether to invest.
To put it simply, the IM is the Investment Manager’s promise to investors and should be read prior to any investment decision.
In our due diligence phase, Partners Private review this document in detail to ensure that the risks and returns are stated adequately and can be fulfilled. During the monitoring stage, we meet with the Investment Manager on a regular basis to ensure that they operate within the confines of the IM and deliver on the stated mandate. The IM contains:
- Summary of the investment: Succinct points on the nature of the investment, key points of the investment strategy and points of differentiation, as well as the targeted amount of capital to be raised.
- Key terms: The main features and benefits of the investment opportunity.
- The investment strategy: The plan for how a fund will invest money to achieve its objectives. It explains what types of assets will be invested in, how it will choose these investments, and the approach it will take to grow capital over time.
- The Fund Manager’s experience and track record: A clear picture of the current business and background of key personnel including their investment experience, so you know who is responsible for the offer.
- Industry and market overview: An overview of the market the business operates in and the trends or challenges in that industry.
Fund Flyer
A fund flyer is a marketing document designed to provide investors with a summary/overview of the investment opportunity.
Unlike an IM, which is detailed and comprehensive, a fund flyer is a snapshot, designed to be visually appealing and easy to read, offering essential information at a glance. The fund flyer helps investors determine an initial interest in the investment before delving into more detailed documents such as the IM.
Partners Private collaborates with our Investment Managers to produce fund flyers that are both succinct and relevant to our investors. These documents typically offer some insight into our view of the manager, the strategy and importantly, the current suitability of the investment to Partners Private clients.
Deciding to invest
After reviewing the IM and the fund flyer a prospective investor should be in a good position to make an informed choice about whether to invest in the opportunity. If the decision is made to invest, an application form needs to be completed. Partners Private will generally complete the application form on behalf of the client once the client submits an intent to invest form located on the Partners Private website investment landing page.
Once the client’s application has been received and approved, the next step is provision of investment funds (capital).
Capital call notice
A capital call notice, sometimes referred to as a drawdown notice, is a notification from the Investment Manager informing investors to provide capital for investment.
This represents the fulfilment of the investor’s obligation of providing capital at the appropriate time (committed capital). This may be a partial or full capital call, depending on the nature of the investment.
A capital call notice will typically include important details such as:
- Your total capital commitment (the full amount you agreed to invest)
- The amount you need to pay for this specific call
- Which number capital call this is (e.g., the 2nd or 3rd call)
- When the payment is due
- The bank account details for where to send the money.
If you are ever unsure as to the legitimacy of a capital call notice, please speak to your Partners Private representative prior to transferring funds.
Holding Statement
Following an initial investment or at periodic times, a Holding Statement may be sent out to investors by the Investment Manager or related service provider. This is the database used by the underlying fund (in the case of feeder fund investments) that keeps record of investor units.
This serves as a dated confirmation to the investor for the number of units held, unit price and their total invested amount. Noting that this may vary to some degree, depending on the asset type, fund type and underlying administration process.
Investor Report (Investment/Fund Updates)
The investor report keeps investors abreast on the progress of their investments alongside anything material that has occurred within the stated timeframe.
This report usually includes the Investment Manager’s commentary of progress in the period, information on a fund level and the underlying investments. Market outlook, investment statistics, manager priorities and other important events will also be highlighted where appropriate.
The Investor Report, which is drafted by the Investment Manager, will first be reviewed by Partners Private to improve the quality and relevance of the information provided. We look to streamline processes on behalf of our investors as we understand that time and attention capacity is limited.
The diagram below provides an overview of the typical sequence of events that occur with a Partners Private investment opportunity.
