Today we have some valuable insight into how one major LP thinks about sub lines before investing in a fund, in this report from Alex Lynn. Future Fund’s Alicia Gregory says the A$161 billion ($113 billion; €97 billion) sovereign wealth fund thinks about who else’s uncalled capital is backing a fund’s subscription credit line when it invests, and advises others to do the same.
The Fund Finance Association reported this summer that there have been only a small handful of institutional defaults on capital calls – even high-net-worth individuals have been performing more or less in line with historical norms. But Gregory’s comments highlight that the way some LPs think about sub lines is evolving, and it may even affect their investment decisions. Gregory also notes that Future Fund’s investment professionals wonder if LPs understand the true totality of their sub line exposures – another reason she cites as why it’s important for Future Fund to understand the creditworthiness of its fellow LPs.
Gregory has more to say on the subject, so read on via the link above.
Email prepared by Graham Bippart