As the subscription credit facility market continues to experience steady growth, lenders seek to expand their lending capabilities beyond traditional subscription credit facilities to commingled private equity investment vehicles (“Funds”). One way lenders have accomplished this is by lending to Funds that have a single dedicated investor in the Fund (each, a “Fund of One”). By way of background, a subscription credit facility (a “Facility”) is a loan or line of credit made by a bank or other credit institution (a “Creditor”) to a Fund that is secured by (i) the unfunded commitments (the “Capital Commitments”) of the investors to fund capital contributions (“Capital Contributions”) to the Fund when called from time to time by the Fund (or its general partner, managing member or manager (a “Manager”)), (ii) the rights of the Fund or its Manager to make a call (each, a “Capital Call”) upon the Capital Commitments of the investors and the right to enforce payment of the same and (iii) the account into which investors fund Capital Contributions in response to a Capital Call.¹

A Fund of One has one investor (which is typically a well-established institutional investor) (the “Investor”). The respective rights and obligations of the Investor and the Manager are primarily contained in the limited liability company agreement, the limited partnership agreement or an investment management agreement of the Fund of One (the “Governing Agreement”). A Fund of One may also have an equity interest from an additional party (typically an affiliate of the sponsor and Manager of the Fund of One), but the additional party’s equity interest is often small compared to the equity investment of the Investor. A number of institutional Investors have shifted towards investing in Funds of Ones for a number of reasons, including: (i) a Fund of One offers greater...