Cross-Fund Investment - Co-Investment Between Two Funds (Same GP)
Recording an investment made jointly by Fund III and Fund IV managed by the same GP in the same portfolio company, requiring careful allocation of investment terms and conflicts of interest documentation.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Investments at Fair Value - Portfolio Co. W (Fund III Share) | Asset (+) | 15,000,000.00 | - |
| Cash & Cash Equivalents - Fund III | Asset (-) | - | 15,000,000.00 |
💡 Accountant's Note
When a deal is too large for a single fund or when the successor fund's investment period has started, GPs may allocate investments across multiple funds they manage. This creates significant conflicts of interest (each fund's LPs have competing interests). The SEC requires written allocation policies and disclosure to all affected funds' LPACs. Pricing must be identical for both funds entering at the same time.
Practitioner & Systems Framework
💻 ERP Architecture
Both Fund III and Fund IV record their respective shares at identical cost per share/unit. Maintain a cross-fund investment register showing all positions where two or more funds managed by the same GP co-invest. Future follow-ons and exit decisions for cross-fund investments require extra LPAC oversight.
⚠️ Audit Flags
Cross-fund investments are a top SEC examination priority for PE GPs. Auditors and SEC examiners review the GP's written allocation policy, LPAC disclosures, and verify identical pricing for both funds. Post-closing adjustments that benefit one fund over another are particularly scrutinized.
📄 Required Documentation
Written cross-fund investment allocation policy, LPAC disclosure and consent for both funds, identical term sheet/SPA for both funds, allocation memo from IC, Form ADV disclosure.
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