Has LNK Partners disclosed co-investment deals and opportunities to all limited partners? UNITE HERE asks

As LNK Partners seeks to raise up to $460 million for a third private equity fund, LNK Partners III, limited partners should seek clarity around the manager’s co-investment allocation process, according to a report by UNITE HERE.

NEW YORK--(BUSINESS WIRE)--A new report from UNITE HERE is available at http://www.pecloserlook.org/report/has-lnk-partners-disclosed-co-investment-deals-and-opportunities-to-all-limited-partners/

Key points:

1. Andrew Bowden, then director of the SEC’s Office of Compliance Inspections and Examinations (OCIE), and Marc Wyatt, Acting Director of the OCIE, made speeches in May 2014 and May 2015, respectively. Each stated their personal views on co-investments, raising specific areas of concern.

2. LNK Partners has created co-investment vehicles alongside LNK Partners I and LNK Partners II.

3. LNK Partners LLC’s Form ADV Brochure from February 24, 2014 disclosed that LNK Partners’ UTIMCO-funded Co-investment Fund was not subject to carried interest or management fees, but did not state whether ABP Investors (a fund I co-investment fund), was also exempt from any fees.

4. UTIMCO is the sole limited partner in LNK Partners II (Co-investment LSS), L.P. (the “Co-Investment Fund”), a vehicle that UTIMCO reported was formed in October 2012, over two months after LNK Partners reported that LNK Partners II L.P. was closed

5. All else being equal, the 12.62% outperformance of the Co-Investment Fund could be explained by the differences in management fees and other expenses borne by the two funds and carried interest. Any variance in investment-opportunity allocation between the two funds could help to further explain the outperformance.

Questions for LPs

• Were all limited partners informed of the existence of co-investment funds and of how co-investors are selected from the limited partner pool?
• Was there disclosure about allocations of costs for diligence and other deal expenses between the primary funds and the co-investment funds?
• Was there a disclosure of the allocation of investment opportunities between the primary funds and the co-investment funds?
• For LPs considering an investment in LNK Partners III: has LNK informed LP’s about co-investment opportunities? Has LNK disclosed any granting of co-investment rights or the terms of any such deals?