CFA Level I · CFA Level I Exam · Investments in Private Capital: Equity and Debt
Which fund term is most likely designed to protect limited partners if the general partner leaves the investment team or becomes distracted by other funds?
A key person clause best protects limited partners here. If named senior professionals leave or devote too little time, the clause can suspend new investments or trigger an investor vote. Tag-along rights concern exits, and fee offsets address transaction fee income.
- AA key person clause that can suspend new investmentsCorrect
- BA tag-along right on portfolio company sales
- CA management fee offset on transaction fees
Explanation
Key person clauses suspend investing or trigger LP votes if named professionals depart or devote insufficient time. Tag-along rights apply to exits, and fee offsets reduce fees by deal income received by the GP.
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