Private i Direct Investments is an add-on module to the core Private i application that tracks the details of security transactions for investors who are directly funding portfolio companies. These direct investments may be co-investments that parallel more traditional, LP-structured commitments, or they may be managed separately from the rest of the private equity portfolio.

Once an investor takes the step to invest directly in a company, an entirely new array of information must be tracked. As rounds of financing and other corporate actions occur in the life of a direct investment, the following questions arise:

• What is the overall performance of the deal? What is its cost?
• What is our total exposure to this company, both across securities we own directly and those held through our limited partnerships?
• How do we assess performance by company and across all of our direct deals? Can we roll these figures up to evaluate performance of the entire alternative assets portfolio?
• How can we track the cost basis of proceeds for different investment rounds?

With the Direct Investments module, an LP can answer all of these questions and more. The module features navigation conventions and terminology consistent with the core modules of Private i, making it easy to learn how to track the unique features of direct securities.  

In contrast to LP investments, where the ownership percentage is static, ownership percentage of a direct investment may fluctuate with each new round of financing in a company. New investors come to the table, and previous investors see their positions diluted. Inventory positions may change with cash flows or with no accompanying distributions.

Interest due on debt securities can be capitalized into equities, or dividends may be paid in shares of stock. Any or all of these transactions affect the investor’s percent ownership of the company. Therefore, tracking these events becomes crucial to understanding the investor’s position and the value of an investment at any given time.

In the world of direct investing, measuring performance of the deal becomes more challenging. Multiple securities held in an investment must each be valued before a snapshot of the entire investment may be understood. Further, different purchasing rounds of the same security may have differing cost bases. The Direct Investments module goes far in solving these measurement issues.

Private i Direct Investments is built on a tax lot model, which organizes rounds of financing in groups called “lots.” In this way, we’ve structured an environment where corporate actions can be tracked by financing round.

This level of granularity provides the investor the opportunity to more closely track the following information:

• Lot-level details, such as cost per unit, original funding date, originating security and lot, current and historical positions and cost bases, as well as other details.
• Corporate actions at the lot level, providing the capability for detailed assignment of costs.
• Gains by lot, making it easier to identify the funding rounds that were most successful.

The result is a more accurate picture of the cash flows and performance relating to direct investments in the portfolio. Although units are purchased in single lots, all other corporate actions may affect all open lots of a security. Such actions can be recorded for only one or for all open lots, across direct investments and even across portfolios.