| Tax Efficiency |
Partnership pass-through avoids most entity-level tax; losses and income flow to investors. K‑1 reporting; potential UBTI for tax-exempt investors |
Regulated Investment Company (RIC) status issues simple 1099s; no K‑1 complexity |
| Liquidity |
Capital locked for fund life (typically 7–12 years); outside of regular distributions, liquidity only through secondary sales, often at a discount |
Periodic repurchase windows (typically quarterly) allow limited redemptions, usually capped at 5% of NAV per quarter at the fund level |
| Valuation & Pricing |
Quarterly NAV with reporting lag; valuations are subjective and may not reflect current market conditions |
Periodic NAV strike; more frequent than drawdown but less transparent than daily-priced vehicles; valuation subjectivity remains for underlying private assets |
| Capital Deployment |
Capital called as deals are sourced; uncalled capital must be reserved/managed elsewhere. Patient deployment with no redemption pressure. J-curve depresses early returns |
Capital deployed into a diversified, already-invested portfolio from day one; mitigates J-curve, but less control over deployment timing |
| Customization |
LPA terms negotiated with GP; side letters available for large investors |
Standardized terms across all investors; limited ability to negotiate |
| Fees |
Management fee on committed/invested capital plus carried interest (typically 20% above an 8% hurdle) |
Management fee on invested assets; performance fee if applicable. Generally lower fee structure than drawdown |
| Investor Access |
Accredited or qualified purchaser requirement; high minimums; capital call administration required |
Available to a broader investor base; no capital call mechanics; simpler operational experience |
| Best Suited For |
Sophisticated investors optimizing for net IRR and multiple of invested capital, and who can tolerate illiquidity and complexity |
Investors seeking private-market exposure with periodic liquidity and simpler administration |