There are two general methodologies we typically see funds use to account for fee breaks via distributions:

Fee break distributions have been supported in the system for some time. In January, we released support for management fee holdbacks.

Configuration

At the fund family configuration level, under Fees > Management fee capital treatment, users can now select the fund family’s methodology for handling management fees in capital activity.

The Distribution methodology setting allows users to specify if they use fee break distributions or management fee holdbacks to resolve open fee breaks during a distribution. The default will be fee break distributions.

Performing management fee holdbacks

If the user has selected “management fee holdbacks” in the above configuration, they will see an option in the distribution flow to add management fee holdback.

Upon selection, a table appears that allows the user to select one or more quarters with outstanding fee to holdback net fees for. In the dropdown to select time periods, the user can see the net fees outstanding for each quarter.

As the user selects various time periods, the fees available to holdback will update dynamically in the holdback summary by fund entity table.

For each row in the distribution table, the user can enter a value in the Fees heldback cell to apply available management fee holdback amounts. The user is able to either enter these holdbacks at the fund family level and auto-allocate, or manually enter management holdbacks across each individual fund. As the user adds holdback values to the distributable cash table, the fees remaining to be heldback will update dynamically in the holdback summary by fund entity table.

If the user no longer wants to apply fee holdbacks, they can select remove to return to the beginning state.

Upon submitting the distribution with a holdback, the system posts a transaction code that identifies the capital as a Fund Distribution for management fees, and reduces by LP the amounts due to each investor.

Users are now able to withhold taxes and/or bank fees from a distribution. This functionality currently only supports withholdings that occur outside of the fund (i.e. do not affect waterfalls, preferred return, or performance reporting); withholdings can currently only be applied to distribution proceeds that have already flowed through the waterfall.

From the Capital Event screen, after adding a distribution and running the waterfall, users now have the option to Add withholding. If there is no distribution or all waterfalls associated with the distribution have not yet been initialized, the action to add withholding will be be disabled.

Upon selecting to Add withholding , users will be presented with the below modal that will allow them to upload an Excel or CSV file with tax and/or bank fee withholdings.

The withholding upload modal includes an exportable excel template that provides the file structure for the upload. The first four columns of the template are pre-populated by the system based on commitments in the fund family. The user can add information in the final two columns to specify tax and/or bank fee withholding per commitment.

Upon uploading the withholding template, the system will validate that the withholding amount is less than or equal to the amount being distributed for each commitment (and return an error if the user attempts to withhold more funds for a given LP than they are receiving).

After the upload is submitted, the withholding amounts are shown in the net event summary table.

If needed, users can click the remove withholding button to clear the withholdings and return to the beginning state.

We’ve updated the fee break distribution user interface to improve clarity around amount and source of fee breaks outstanding to true-up.

Users can now expand and collapse the historical fee break details to view the history of fee breaks accrued and fee breaks already resolved. The user can also now link out to an investor breakdown of fee history to see inception-to-date outstanding fees per investor.

As users apply fee break amounts in the Distributable Cash table, the fee breaks applied and remaining will update dynamically in the above Fee Break Distribution table.

We have updated the equalization breakdown table that’s shown when running (or viewing a completed) equalization capital event to improve visibility into the equalization calculations that the system has performed. This work moves us closer to our goal for every table in the system to be able to be exported in a format that allows users to easily add in formulas in Excel to audit our calculations as necessary.

Changes made to this view:

For the calculation of performance metrics, users can now specify how (positively or negatively) a given transaction code affects Gross or Net IRR.

When processing a subsequent closing, users are now able to edit the equalization’s effective date to preview how equalization amounts would change based on different dates for the equalization capital event. This is useful if the fund references the cash equalization date (rather than the closing date) to calculate equalization interest.

There is now an Effective date badge in the header of the equalization preview table. This field will default to the date of the draft closing.

Users can click on the effective date to popup the below modal and adjust the reference date (based on the estimated date for the cash equalization).

We’ve updated the final page in the fee posting flow (“Review Fee Posting”) for improved clarity.

Summary of changes:

When defining an advanced calculation for a Fee basis category , users are now able to reference portfolio transaction tags so that inputs to the fee basis can be based on uploaded portfolio transactions. This gives users greater flexibility by allowing users to reference fee basis components to be uploaded during fee posting to support feeing on components the system doesn't track.

Users can now also reference the subtraction [ - ] operator when defining a Fee Basis calculation. Previously, we only supported the addition [ + ] operator.

We’ve expanded system support for external IDs on the investor entity to allow for more control over mapping investor entities to the various third-party systems a fund may use (e.g. general ledgers such as Investran and Yardi; Investor portals such as Juniper Square, etc.).

Users are now able to define multiple external IDs per investor entity. Users will be requried to define an associated type for each external ID:

Users can define multiple external IDs of the same type on the investor entity if required. Users are optionally able to define a specific fund associated with a given external ID, which allows for creating unique IDs on an investor entity for a given third-party system to represent all commitments from that investor entity in a specific fund.

For example, an investor entity "Mary Smith" might have the below external IDs:

This example would allow for two separate groupings of all of Mary Smith's commitments in Main Fund 1 and all of Mary Smith's commitments in Parallel Fund 1.

Users can now define (at the fund family level) which third-party General Ledger and Investor Portal the fund is using. This configuration will ultimately drive which data export formats are available throughout the fund family (see "General Ledger data export for Yardi Investment Manager" below).

Under Configuration > Fund Family > Profile, users will now see a Third-Party Integration section that allows for selecting their desired third-party General Ledger and Investment Portal.

Currently, we support the below selections, but we'll be expanding support for additional third-party systems over time:

The system now supports data exports for Capital Events and Fee postings formatted for easy import into Yardi Investment Manager.

If a given fund family has configured their third-party General Ledger = Yardi , then within a given completed capital event and a given posted fee period, users will see the below three dot menu that allows for a single-click creation of a Yardi IM import ETL for the event.

Currently, Yardi exports are limited to capital events and fee accrual events, but in the future, we will look to expand this to support additional events (e.g. hypothetical waterfalls and credit facility activity) based on user needs.