The Challenges of Managing a Customized Fund Structure: What Fund Managers Should Know about Single-Asset and Single-Investor Funds

This practice note discusses the advantages and challenges of pursuing a single-asset or single-investor fund structure and offers tips to fund managers looking to pursue these arrangements with investors. Single-asset funds pool capital from multiple investors to invest in a single security, transaction, or acquisition. As managers continue to explore offerings beyond traditional strategies and fund structures, they may elect to pursue opportunities through vehicles designed to acquire a single asset.

Single-investor funds, often called funds-of-one, deploy capital on behalf of a sole investor (or group of affiliated investors). Single-investor funds often invest in multiple securities, transactions, and acquisitions. Like single-asset funds, single-investor funds have increased in popularity as investors are seeking customized structures, in turn requiring managers to become adaptable to these bespoke vehicles. Distinguished from funds that invest in many assets and transactions, or cater to many investors, single-asset funds and single-investor funds involve unique legal, regulatory, and operational challenges, including structure, fees and expenses, term and liquidity, and follow-on investments and restructurings.

Sometimes single-asset or single-investor funds operate alongside, or may even co-invest with, larger commingled funds. For context on these situations and related issues, see Co-investments Guide: Issues to Spot and Raise When Making a Private Equity Direct Co-investment, Side Car Funds: Solutions for Sourcing Capital, and Single Asset Fund Recapitalizations: Key Considerations for Sponsors and Investors.

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