Understanding the AIF Decision
Manager selection is the core AIF decision because investors cannot easily exit or replace the manager. Brand recognition helps with sourcing and fundraising but does not prove disciplined underwriting or good net outcomes in the current scheme.
Reading the Structure and Economics
Separate the team’s realised, attributable track record from firm-level marketing history.
Study decision rights, key-person provisions, succession and employee turnover.
Test whether the strategy, team size and fund size are internally consistent.
Where the Investor Can Get Caught
A large new fund can dilute a previously successful niche.
One blockbuster exit can dominate the record.
A stable senior team can still have weak governance or valuation controls.
Making the Allocation Decision
Before acting, answer five questions in writing: review realised losses as carefully as winners; ask who led each attributed investment; compare fund size with the opportunity set; examine gp commitment and conflicts; and speak with existing lps where possible.
A good manager can explain not only how money was made, but how mistakes were contained.
Key takeaways
- Separate the team’s realised, attributable track record from firm-level marketing history.
- A large new fund can dilute a previously successful niche.
- A good manager can explain not only how money was made, but how mistakes were contained.
Related questions
What should an investor verify first?
Separate the team’s realised, attributable track record from firm-level marketing history.
How does the structure affect the investor’s outcome?
Study decision rights, key-person provisions, succession and employee turnover.
What is the main downside to test?
A large new fund can dilute a previously successful niche.
How should the final decision be made?
A good manager can explain not only how money was made, but how mistakes were contained.
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