Over the past 20 years, Greenough Group (GCG) has provided back-end financial and administrative services to more than 200 Venture Capital, Private Equity, Hedge Funds and Alternative Investment Funds. Our Fund clients range in size from $5 million to almost $1 billion under management.
In all our engagements, we provide outsourced accounting, reporting, audit management, portfolio management, due diligence for investment decisions and tax compliance support. We also assist General Partners (GPs) in interpreting their Limited Partnership Agreements (LPAs) and in setting up accounting and control policies and procedures. Our client team for each of our engagements consists of CFO level input and oversight, and a combination of Controller and Accounting Manager support, as appropriate. This outsourced team usually does the monthly/quarterly fund accounting work including:
Reviewing investment documentation and recording portfolio investment entries.
Reviewing and recording investment security conversions on follow-on financings.
Reviewing portfolio company sale/merger transactions to properly record realized gains and losses.
Recording fund expenses, reconciling bank accounts and handling General Partner and Management company accounting.
Calculating the allocation of realized and unrealized gains and losses to the Fund partners.
From this work, we produce the quarterly and annual financial reports that are reviewed by each Fund’s GP. These quarterly and annual financial reports form a key element in the GP’s reporting obligations to each Fund’s Limited Partners (LPs).
In the typical engagement, the Investment Manager is responsible for monitoring and contacting portfolio company management to obtain investment documentation, financial statements, capitalization tables and performance metrics. Based on the typical LPA and customary accounting and auditing practice, the GP is ultimately responsible for providing a Fair Market Value estimate for each of the investments in the Fund’s portfolio at the reporting date. Smaller Fund clients typically lack the staff to timely analyze this portfolio company information. We can and do provide the necessary assistance to the GP to develop quarterly and annual portfolio company valuations. Our larger Fund clients may have dedicated in-house analytical capabilities, and, in these cases, we provide useful, independent third-party review. In either instance, the GP has the ultimate responsibility for these valuation decisions.
The annual Fund Audit produces financial statements with an accompanying opinion by the Audit firm that the financial statements present fairly, in all material respects, the financial position of the Fund as of the reporting date and the results of its operations, changes in partners’ capital and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States (GAAP). Our role in this process is to provide the Auditor with the unaudited financial information required to perform the audit, answer questions and, in general, manage the audit relationship so that the General Partner can concentrate on the Fund value creation process. Likewise, we support the tax compliance process that produces the Fund’s annual tax return filings and K-1’s for its LPs.
We trust that the above summary of our Investment Fund consulting practice provides the reader with some useful insights into the range of experience and capabilities GCG has and the respective roles and responsibilities that are necessary to provide accurate and compliant Fund accounting and reporting.