Due to the uncertainty and the chilling effect it may have on the market, it is imperative that fund managers take a proactive approach on multiple fronts: investor relations, disclosures and communications, insurance and banking relationships, and institutional capital market relationships.
It is essential that fund managers communicate their plans to investors, the need to preserve capital in uncertain times, and ensure transparency and integrity throughout the process. While this is done via disclosures and communications (see below), it is also achieved through relying on the strong relationships you have built with your investors over the years. Telephone calls, video conferencing, and webinars are great ways to have a direct line of communication to your investors, and deliver your message with a personal touch.
Disclosures and Communications
The impact of this COVID-19 pandemic may negatively impact the fund. Crafting a disclosure addressing global pandemics or other national emergencies of this scale may not be covered in your existing private placement memorandum (PPM). We recommend fund managers deliver supplemental disclosures addressing the potential impact, as well as the fund manager’s strategy to protect the fund, should the pandemic negatively impact the fund’s portfolio.
Evaluate Insurance and Banking Relationships
Like any business, your insurance policies may provide additional coverage for business disruption and certain force majeure scenarios. Speak with your carrier and read your policy to ascertain whether viral or bacterial carve outs exist. Even so, there may be an argument to be had, as this particular pandemic resulted in shelter-in-place orders by local and state governments, creating significant disruptions to your business.
In addition, it is essential to contact your banker and ensure your bank will stand by you during these trying times. Credit lines, small business loans, and other resources are available, but only if you contact your banker. If you already have a credit line, contact your banker to ensure you have a line of sight on any changes your bank may make to their credit policies over the coming months.
Institutional Capital Markets Relationships
There are several capital markets resources in our market today – many have become household names, and many of them have reduced or halted their activities. This is likely a temporary issue. To fill the gap this has created, we recommend contacting your colleagues, competitors, and friends in the market. Collaborate and work towards a solution, and you’d be amazed what you can achieve.