medium · Private Equity pe-core
Heritage Foundation is a US tax-exempt LP. It receives a capital call for 'Zenith Fund II'. The GP explains that part of the capital is for an 'AIV' (Alternative Investment Vehicle).
Why would the GP use an AIV for a specific deal?
- To invite outside co-investors, who are not existing LPs of the main fund at all, into just that one deal
- To restart the entire ten-year fund life clock and push out the contractual exit deadline for that specific asset
- To let the GP earn a boosted carried interest rate of 25 percent, above the usual 20%, on that one specific deal in the fund
- To structure a specific investment to avoid a tax or regulatory issue that the main fund cannot easily accommodate
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