A Second Closing

Introduction

In this section you will process the fund’s second closing, :closing-02 in the sample events, which is an additional two commitments of $1,000,000 each on 2018-03-10 from Klein Industries (:p-003) and Gualas LLC (:p-004), bringing the fund’s total of commitment amounts to $4,000,000.

Process the Closing Event

Navigate to the event processing page using the Process Previously Saved Events link located in the top panel of the Home page and on the page select the simple-test event set in the dropdown to display its events.

Scroll down to the closing-02 event and select it by clicking the checkbox in the first column.

The closing-02 event should be the first event without a green check-mark icon in the first column indicating that is the first event in the event set that hasn’t yet been processed and posted.

Scroll back up to the top of the page and click the Process button.

Again, you will be redirected to the Log page. This time you will see what might appear to a great many message. This is expected. In order to process a closing the system will unwind every previous event and rewind it using the new Commitment Regime. What you are seeing on the log page is a record of this activity.

Review the Results

If you return to the Comparison report, and review the fund’s net financial and portfolio positions before the closing (in the :current environment) and after the closing (in the :pending environment) you will notice that there has been no change - the balances in all the top level accounts are the same.

This is correct. A closing will only redistribute balance sheet and P&L items amongst partners, by posting adjustments, it does not materially affect the fund’s total net positions.

Compare the :Investment Account Partners’ Balances

If you drill down into the :Investment account for the investment :pc-001 you will see, on the :current side of the report,

and, on the :pending side of the report,

indicating the on a pari passu basis each partner has an equal economic interest in the investment. This is as you might expect, considering each partner’s equal commitment, and that there were no “opt outs” in the fund.

Review Partner :p-001's :Investment Account Register

And, if you drill down further and review partner :p-001's (Interdem Associates) register, you’ll see on 03-10-2018 (the date of the closing) a net credit adjustment of $15,000. The cost-basis component of the that $15,000 adjustment (which is $12,500) will be returned to the partner’s capital account, and the gain component of the $15,000 (which is $2,500) will be reallocated to the newly committed partners.

Partner :p-001's Base Capital Account Register

A review of the partner’s Base Capital account shows on 03-10-2018 the cost basis of the investment being “returned” to the partner, possibly for re-deployment at a later point in time.

Partner :p-001's Unrealized Gain/Loss Account Register

A review of the partner’s Unrealized Gain/Loss account will show a net adjustment on 03-10-2018 of $2,500, which with partner :p-002's portion was reallocated to partners :p-003 and :p-004, the new partners.

Although, the account registers appear “noisy”, the level of detail is necessary for the system to operate correctly. Other, more sophisticated, print-quality reports will consolidate certain information and elide certain information, greatly simplifying the output.

Partners’ Receivable Account Balances

If you take a look at the Partners’ Receivable Account balances, you’ll notice that although the total hasn’t changed, partners :p-001 and :p-002 have over-payments, while partners :p-003 and :p-004 are in arrears. This is correct, and the system is behaving as it was configured.

Partners :p-001 and :p-002 have each indubitably made payments totalling $225,000 to the fund ($50,000 each on 2018-01-01; $100,000 each on 2018-02-05; and $75,000 each on 2018-03-05). You processed the events earlier.

The system does not dictate how the fund manager, or administrator, ought to handle this situation.

There are a number of complementary options:

• Catch-Up Calls (with an allocatable interest premium) can be made to the new partners, with existing partners being opted-out. This is generally done, independently of, and separate from how the the credit balances of partners :p-001 and :p-002 are handled.

• The apparent over-payments from :p-001 and :p-002 can be left on the books and used to reduce the amounts of future calls to those partners.

• Some, or all, of the amounts of the over-payments can be returned to the partners using a distribution of Recallable Capital (from which other partners would be opted out).

Review the Partner :p-001's Portfolio Balances

It is possible to view an individual partner’s Portfolio balances using the Financial report. On that page, after selecting the :pending environment, select the partner in the drop-down control and portfolio and financial reporting will be restricted to that partner only, in this case partner :p-001 (Interdem Associates).

Review the New Commitments

If you review the partners’ Commitment report in the :pending environment, you can see the new positions.

Note that the over-payments of partners :p-001 and :p-002 are clearly visible, as too are the non-payments and arrears of partners :p-003 and :p-004.

Post the Results

You should return to the Environment Control Panel from the link on the Home page (or by clicking the Environments item in the main slide-out menu).

Click on the Post Pending button to post your results to the :current environment.