Important Information and Risk Factors
An investment in private equity involves high degree of risk, and therefore, should be undertaken only by prospective investors capable of evaluating the risks of private equity and bearing the risks such an investment represents.
Risks Related to the Structure and Terms of the Private Equity Funds. Investments in a fund of funds structure may subject investors to additional risks which would not be incurred if such investor were investing directly in a fund. Such risks may include but are not limited to (i) multiple levels of expense; and (ii) reliance on third-party management. In addition, private equity funds may issue capital calls, and failure to meet the capital calls can result in consequences including, but not limited to, a total loss of investment.
Illiquidity of Interests; Limitations on Transfer; No Market for Interests. An investor in a HarbourVest-managed fund or account will generally not be permitted to transfer its interest without the consent of the general partner of such fund. Furthermore, the transferability of an interest will be subject to certain restrictions contained in the Limited Partnership Agreement of a fund and will be affected by restrictions imposed under applicable securities laws. There is currently no market for the interests in HarbourVest-managed funds or accounts, and it is not contemplated that one will develop. The interests should only be acquired by investors able to commit their funds for an indefinite period of time, as the term of the fund could continue for over 14 years. In addition, there are very few situations in which an investor may withdraw from a private equity fund. The possibility of total loss of an investment in a fund exists and prospective investors should not invest unless they can readily bear such a loss.
Risk of Loss. There can be no assurance that the operations of a HarbourVest-managed fund or account will be profitable or that a HarbourVest-managed fund or account will be able to avoid losses or that cash from operations will be available for distribution. The possibility of partial or total loss of capital of a portfolio exists, and prospective investors should not subscribe unless they can readily bear the consequences of a complete loss of their investment.
Leverage. HarbourVest-managed fund or account may use leverage in their investment strategy. Leverage may take the form of loans for borrowed money or derivative securities and instruments that are inherently leveraged, including options, futures, forward contracts, swaps and repurchase agreements. A fund or account may use leverage to acquire, directly or indirectly, new investments. The use of leverage by a fund or account can substantially increase the market exposure (and market risk) to which such fund’s or account’s investment portfolio may be subject.
Availability of Suitable Investments. The business of identifying and structuring investments of the types contemplated by HarbourVest-managed funds or accounts is competitive and involves a high degree of uncertainty. Furthermore, the availability of investment opportunities generally will be subject to market conditions and competition from other groups as well as, in some cases, the prevailing regulatory or political climate. Interest rates, general levels of economic activity, the price of securities and participation by other investors in the financial markets may affect the value and number of investments made by the fund or considered for prospective investment.
Reliance on the General Partner and Investment Manager. The success of HarbourVest-managed funds or accounts will be highly dependent on the financial and managerial expertise of the fund’s or account’s general partner and/or investment manager and their expertise in the relevant markets. The quality of results of the general partner and/or investment manager will depend on the quality of their personnel. There are risks that death, illness, disability, change in career or new employment of such personnel could adversely affect results of the fund or account. With respect to commingled funds, the limited partners will not make decisions with respect to the acquisition, management, disposition or other realization of any investment, or other decisions regarding the commingled fund’s businesses and portfolio.
Market risk: Private equity, as a form of equity capital, shares similar economic exposures as public equities. As such, investments in each can be expected to earn the equity risk premium, or compensation for assuming the non-diversifiable portion of equity risk. However, unlike public equity, private equity’s sensitivity to public markets is likely greatest during the late stages of the fund’s life because the level of equity markets around the time of portfolio company exits can negatively affect private equity realizations. Though private equity managers have the flexibility to potentially time portfolio company exits to complete transactions in more favorable market environments, there’s still the risk of capital loss from adverse financial conditions.
Potential Conflicts of Interest. The activities of a HarbourVest-managed fund or account may conflict with the activities of other HarbourVest-managed funds or accounts.