Updated June 2024

I. INTRODUCTION

As the fund finance market continues to mature, fund-related product offerings are expanding both in
number and in customization, attracting a broader array of private equity and real estate funds (“Funds”) and credit providers, and increasing the range of the financing products available to Funds and their Sponsors (“Sponsors”) beyond the traditional subscription credit facility product. We have seen growing interest among participants in the Fund finance market in partner or employee loan programs, often also commonly referred to as a shareholder or Sponsor loan program or a co-investment line of credit, depending on the nature and structure of the facility (a “Co-Investment Facility”). At the most fundamental level, a Co-Investment Facility is a line of credit extended by a bank or other financial institution (a “Lender”) to an individual member, principal or key employee of a Fund’s General Partner (“General Partner”), affiliated Management Company (“Management Company”) or Sponsor (collectively, a “Participant”), the proceeds of which are used by the borrower to make direct or indirect investments in Funds managed by their firms or the General Partner or Management Company affiliated with such Funds. Co-Investment Facilities are frequently established on a platform basis, permitting multiple Participants to partake in the benefits of a credit line while streamlining the documentation process. In some cases, a Co-Investment Facility is structured with the Fund’s General Partner, Sponsor-affiliated “special limited partner” or Management Company (collectively, a “Sponsor Vehicle”) as the borrower, with individual employees and principals acting as guarantors of the facility based upon a pre-determined maximum allocation of the overall facility amount. While there are a number of similarities between a Co-Investment Facility extended to a General Partner or Management Company and what is commonly known as a management fee credit facility , this article will focus primarily...