Raising A Fund? 9 Questions That Help Get You To GP/LP Fit
Elizabeth“Beezer”Clarkson
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Another important question to ask: how much are you required to distribute to beneficiaries each year? Sovereign wealth funds, endowments, pensions, high net worth individuals, etc. will all have different liquidity profiles that can affect their abilities to meet capital call requirements during market downturns. One only needs to look back ten years ago to see that a number of LPs were unable to fund capital calls due to a lack of liquidity, or would even strategically default on their commitments.

GPs *should* be asking this question, or risk being caught in a compromising position if/when the tide goes out — which could hurt even more depending on their usage of credit facilities, though that’s another discussion…