Year-End Reminders for Fund Managers

• December 1, 2023
• Carey M. Heyman, CPA

As year-end approaches, fund managers should prepare for compliance season by working closely with their service providers to ensure delivery dates are met and potential hurdles are anticipated.  We recommend that fund managers consider the following:

Have open and honest conversations.   

• Engage your fund administration, tax, and assurance teams to set expectations and establish preferred timing. Proper planning will help ensure timely delivery of investor reports, K-1’s and financial statements.
• Be proactive in your communications with limited partners (or members). Be clear and transparent when timelines shift.  Remember that all of your hard work is to inspire confidence with the limited partners (or members) with their investment and in you as their fund manager.

Review underlying books and records.

• Reporting of investments.  Reconcile investment activity and verify that underlying support is consistent with reporting.  Funds reporting on U.S. GAAP basis are required to state their investments at fair value.  Look at all investments made over the last six months and organize relevant financial reporting information to support fair value adjustments.  Engage an advisor to assist, when in doubt.
• Capital allocations.  Review your monthly or quarterly allocation schedules and verify if the activity is in accordance with the partnership (or operating) agreement.  The allocation schedule has a direct impact on the K-1s, so it is important to ensure that your limited partners (or members) receive what they signed up for.  Also, don’t forget to review ending capital balances and to confirm that each partner’s (or member’s) percentage of capital is consistent with their respective ownership percentages.
• Transactions with the general partner (or managing member).  Review any incentive allocations earned by the general partner (or managing member) or management fees paid to the general partner (or managing member).  Ensure that the amounts are calculated based on the provisions of the partnership (or operating) agreement, since these transactions directly impact limited partner or member capital.
  

Thanks to Robert Dormanesh for authoring this blog post!

Tags: Capital, Fund Manager, Investments, LPA, Operating Agreement, Partnership Agreement, Private Equity, Real Estate, Industry best practices, Industry trends/analysis, Year-end tax planning | Comments Off on Year-End Reminders for Fund Managers