Some fund managers choose to contribute past investments into their Rolling Funds, a process sometimes referred to as “warehousing.” Depending on the circumstances and nature of the investments, those investments may count towards the “non-qualifying investments” basket and thus be limited to no more than 20% of any given quarterly fund’s size.
Broadly, to warehouse investments into a Rolling Fund, the investment must: (1) not exceed 20% of the fund’s size, if determined to be a non-qualifying investment, (2) be adequately disclosed to the Limited Partners, (3) fit the Rolling Fund’s thesis, (4) be transferred to the Rolling Fund at its original purchase price, (5) not be “cherry-picked*,” and (6) generally, be transferred to the first quarterly fund in the Rolling Fund program. As there are many elements at play here, our Venture Capital Associates and in house legal team will work closely with the fund manager to facilitate these transfers.
*When we refer to “cherry picking” in this context, we mean that the investment(s) must represent all the fund manager’s investments that meet the criterion for transfer. For example, if the fund manager is transferring PropTech investments made since January 2021, the fund manager would need to contribute all PropTech investments in that time period.