PERA Due Diligence Questionnaire - Public Employees Retirement ...

PERA OF NEW MEXICO - INVESTOR QUESTIONNAIRE
1 Partnership Information:
1.1 Full legal name, date, and jurisdiction of formation of the Fund and the GP entity.
1.2 Primary contact person and contact information for the Fund.
a. Investor Relations & Due Diligence
b. Legal
1.3 Dollar size of proposed fund:
a. Total amount expected to raise and hard cap.
b. Total committed capital to date, expected first close date and amount, and final close date.
c. Amount to be invested by General Partner.
1.4 Identify which prior LP investors have committed to the Fund and the commitment amount. Provide a list of Limited
Partners invested in previous funds. (Exhibit A)
1.5 Which statutory or regulatory body supervises the operations of the Fund and its manager or advisory company?
1.6 Provide the name and contact details of any placement agents used for fundraising or for the organization of fund.
What is the fee arrangement/fee structure? Explain who pays the fees?
1.7 List names of consultants, legal advisers, accounting firms, and any other advisors for the fund.
1.8 Provide fund counsel details.
1.9 Provide fund auditor details.
1.10 Bank used to deposit Fund’s cash.
1.11 Provide a capsule history of the firm.
1.12 What are the firm’s total assets under management?
1.13 Is the General Partner a registered investment adviser under the Investment Company Act of 1940?
1.14 Will the General Partner be allowed to form and manage any other type of investment partnership during the
proposed partnership’s investment period?
1.15 Describe other business activities of the firm and affiliated companies.
1.16 Will Fund transact any business with affiliates? If so, list affiliate names and addresses and provide copies of
operating agreements.
1.17 What is the total amount of uncommitted capital available for investment held by predecessor funds?
1.18 List the appropriate corresponding public market index (in whole, blended or otherwise) and spread.
2 General Partnership/Personnel:
2.1 List the names of the management team, including year joined firm. List the senior Investment professionals,
including year joined firm.
2.2 Provide an organizational chart. Include detail to the vice president-level, Investment Committee membership, and
roles and areas of responsibility.
2.3 Provide biographies of all members of the investment team in an appendix, including educational background and
employment history. (Exhibit C)
2.4 How much of their time will the managing directors devote to this fund? Are they part of any other management
teams, companies, or partnerships?
2.5 Use the table below to list the percentage of time that the senior investment professionals expect to devote to each
role in the investment process for the fund.
Managing Managing
Partner1 Partner2 MD1 MD2
Generating deal flow/research and niche analyses % % % %
Reviewing opportunities % % % %
Monitoring investments from prior funds % % % %
Investor relations % % % %
Administration/HR/other internal activities % % % %

Outside activities % % % %
Total 100% 100% 100% 100%
2.6 Explain how the professionals are compensated, detailing components (base, bonus, etc.), how compensation is
determined and vesting.
2.7 Who shares in the carried interest? Please provide a break-out by percentage using the below table as a guide:
Cumulative
Amount Invested
12.000% vests at time of first closing 12.000%
12.175% vests at the end of year 1 24.175%
12.175% vests at the end of year 2 36.350%
12.175% vests at the end of year 3 48.525%
16.475% vests at the end of year 4 65.000%
Total 100%
*Remaining 35% vests at realization.
2.8 Describe the ownership structure of the General Partnership entity. List the Firm’s principals, individuals and/or
entities owning 10% or more of the Firm.
2.9 List the names of any team departures from professional investment staff since inception and include reason for
departure.
2.10 Does any Managing Director own, directly or indirectly, any private companies? Does any Managing Director have
any involvement or relation with a company that has a conflict of interest with the fund?
2.11 Describe any health, financial, personal, or other conditions of any of the general partners that might influence their
ability to execute their duties to the proposed fund.
2.12 Please discuss your hiring plans for future partners and professionals. Please discuss organizational growth plans.
2.13 Describe succession plans.
2.14 Have any of the investment professionals or affiliates of the general partners been allowed to invest or participate in
or alongside any prior portfolio company investment outside of their limited and General Partner’s commitment?
2.15 Will any General Partner affiliates invest in, own an interest in or have any participation or role in, the proposed
Partnership or the General Partner or its portfolio investments?
2.16 How much capital is the company’s investment professionals expected to invest in the Fund?
2.17 Are any of the individuals acting as members on any other management teams or companies/partnerships? Please
provide details.
2.18 Provide biographies of the advisory board members.
2.19 Will the firm be able to invest the Fund with its current investment team in place?
2.20 How are investment professionals recruited?
2.21 How are new recruits mentored?
2.22 What measures are in place to retain staff (ie: vested interest in the carry)?
2.23 Are any of the firm’s key personnel under employment contract? Please detail.
2.24 Where are the offices of the firm? Where are the managing directors located?
2.25 Describe the cooperation/communication between the various offices.
2.26 Does Sponsor expect to establish any new office locations during the life of the Fund?
3 Investment Strategy & Process:
3.1 Summarize your investment philosophy and process for making investments.
3.2 Describe the business sector and industry focus, and geographic focus. Provide expected sector, industry, region
concentrations.
3.3 What will be the estimated size of deals and the number of deals in the Fund?
3.4 What is the anticipated Investment Period and what is the anticipated Hold Period for investments?
3.5 Provide expected return information. List the minimum IRR that an investment would be expected to realize as well
as the target return for individual investments.
3.6 Describe what differentiates this Fund positively in the current marketplace? Explain the firm’s most compelling
competitive advantages.
3.7 Explain how the firm creates value for the portfolio.

3.8 Describe the asset classes and/or opportunities being targeted by the Funds.
3.9 What/who is the competition for this strategy and investment philosophy? What are your competitive advantages
compared to other players in the market?
3.10 Describe the due diligence process. Provide a sample due diligence memorandum (EXHIBIT D). Include checklists,
questionnaires, internal reports and financial models (EXHIBIT E).
3.11 Describe the General Partner’s investment decision process.
3.12 Describe the investment committee. Please list the members of the committee.
3.13 Please provide a copy of a recent write-up for the investment committee (EXHIBIT F).
3.14 In which cases were you active in replacing or supplementing the management team when it was needed?
3.15 Can the proposed fund invest in public securities? Indicate under what circumstances and with what limitations.
3.16 How long will you hold onto a stock after an IPO?
3.17 Discuss whether your firm utilizes third party consultants, including frequency and selection process. Are these
expenses absorbed by the partnership, the portfolio company, or the GPs?
3.18 Summarize the manager’s view on co-investment opportunities.
3.19 List the change in deal size, deal number or event strategy since the last fund.
3.20 Will the Fund act as a lead investor, a co-investor or a sole investor?
3.21 Will the Funds pursue investments where it has a non-controlling interest or as a passive co-investor?
3.22 What controls and rights will the General Partner take with minority shares?
3.23 How many deals have you analyzed? What are the primary reasons for not investing in certain deals?
3.24 Explain the General Partner’s sourcing abilities.
3.25 How distinctive are the deal sources? On a total fund basis, provide a breakout (in percentage) representing how
deals were sourced. (ie: auction, limited auctions, etc. – EXHIBIT G)
3.26 What risk management techniques/concepts are applied to the portfolio?
3.27 Explain the process for avoiding adverse selections.
3.28 Explain how exit opportunities for existing and future investments are generated.
3.29 What are the procedures used to determine the exit timing?
3.30 How does the Fund ensure its ability to exit advantageously?
3.31 Is the General Partner able to re-invest capital from realized investments?
3.32 Describe what would be considered critical deal breakers. Discuss the reason(s) the Fund may pursue an
investment opportunity but ultimately not invest.
3.33 What has been the magnitude of dead deals costs for each of the Funds?
3.34 Describe the firm’s asset management process.
3.35 Describe the Funds’ parameters on the use of leverage.
3.36 Describe underwriting assumptions used when evaluating an investment.
3.37 Is there any investment restrictions included in the Partnership Agreements?
3.38 Do the Funds include any existing or pending assets or investments? If yes, please describe.
3.39 Has a transaction ever been rejected at the Investment Committee level and if so, why?
3.40 How are transaction teams staffed?
3.41 Please describe your post investment monitoring process.
3.42 What are the major factors which are monitored in the portfolio companies?
3.43 How often and in what form do you receive reporting from your portfolio companies?
3.44 What lessons have been learned from previous investments in the past and how has the strategy been enhanced
as a result?
3.45 In how many instances have you been active in replacing the senior management team when it was needed?
3.46 How are conflicts of interest identified and avoided?
3.47 What is the strategy concerning potential risk factors?
3.48 Methods for valuing restricted stock and other non-cash distributions.
3.49 Identify which portfolio companies, if any, have any past-due audits, including those for which a re-audit was
requested, or for which auditors have expressed a qualified opinion in the past three years.
3.50 Have there been any late SEC filings made by the General Partners of any portfolio companies in the past three
years?
3.51 Provide a list of all unrealized investments with any debt securities or loans that are in or near default (payment or
technical) or have been in default within the last 36 months. Also please indicate whether the default is payment or
technical and provide detail on bank negotiations.

3.52 Please provide a list and details regarding any defaulted/ing LPs and the amount ($) in their interest they have
transferred.
3.53 What commodity price assumptions do you use in your investment decisions?
3.54 What is your hedging policy?
3.55 Provide references for each portfolio company in previous funds, as well as co-investors, bankers, and lawyers.
(EXHIBIT H)
4 Fund Data:
4.1 Briefly describe the performance of prior fund(s), indicating which are still active, which the General Partners (key
individuals) have managed, and which involve management of like assets to those of the proposed fund.
4.2 How much capital is committed to and reserved for existing portfolio companies? Use the table below:
Fund I, LP Capital Invested and Reserved
(Millions of dollars; as of MM-DD-YY)
Initial Additional Total
Investment Current Reserve
Mid-Case
Portfolio Company Date Investment Mid-Case
Investment
Exited Investments
Energy Corp. MM-YY $ $ $
ABC Offshore Corp MM-YY $ $ $
Current Investments
Pipeline Corp. MM-YY $ $ $
XYZ Services MM-YY $ $ $
Total Investments $ $ $
Fund II, LP Capital Invested and Reserved
(Millions of dollars; as of MM-DD-YY)
Initial Additional Total
Investment Current Reserve
Mid-Case
Portfolio Company Date Investment Mid-Case
Investment
Exited Investments
Cobalt Energy Corp. MM-YY $ $ $
ABC Drilling Corp MM-YY $ $ $
Current Investments
E&P Corp. MM-YY $ $ $
Offshore Services MM-YY $ $ $
Total Investments $ $ $
4.3 Provide profiles for each portfolio company in previous funds. Use EXHIBIT I as a template.
4.4 Complete and return Fund Data Spread Sheet for all previous funds. Use Exhibit J.
4.5 Describe your valuation policies and procedures. Provide a copy of your valuation policy. (EXHIBIT K)
5 Deal Terms:
5.1 Complete and return the LPA Ratings Work Sheet. (EXHIBIT L)
5.2 Provide the terms of the Funds. What are the provisions for early termination of the Funds?
5.3 How do the proposed terms for the current fund differ from the terms of the previous fund?
5.4 Under what conditions or on what basis could the GP be replaced?
5.5 Describe the Key Person provision?

5.6 Will the partnership interests be transferable?
5.7 Will there be a valuation or conflicts of interest committee? What powers will this committee retain? Who will be on
it? Will committees be paid by the partnership? If yes, under what circumstance?
5.8 Briefly describe your policies to share/allocate investment opportunities between concurrently active Funds under
the same affiliated management, if any.
5.9 Please explain how the interests of GP and LP will be aligned.
6 LP Reporting and Communications:
6.1 Describe your internal accounting capabilities and your abilities to fulfill the necessary reporting requirements of an
institutional client.
6.2 Are the financial statements for the Fund prepared in accordance with U.S. GAAP?
6.3 Describe investor reporting format and frequency. Provide samples of reports to investors. (EXHIBIT M)
6.4 Are your capital call and distribution notice formats compliant with the Institutional Limited Partner Association
(ILPA) guidelines? (ILPA CCN & DN Guidelines) If not, will you be bringing your formats in-line with the ILPA
guidelines in the current fund?
6.5 Describe how the financial statements are prepared. How will investments be reported within the financial
statements of the Funds?
6.6 Is your quarterly reporting compliant with the ILPA quarterly reporting guidelines? (ILPA Quarterly Report
Guidelines). If not, will you be bringing your formats in-line with the ILPA guidelines in the current fund?
6.7 Provide samples of capital call and distribution notice. (EXHIBIT N)
6.8 Discuss the valuation methodology applied to realized and unrealized investments.
6.9 What meetings are arranged for limited partners?
6.10 What committees are set up?
6.11 How is membership of each committee determined?
6.12 Can the appointed representatives of a Committee be replaced from time to time by an alternate person?
6.13 Describe the firm’s co-investment history with Limited Partners.
6.14 Is there a co-investment allocation policy?
6.15 Are there any specific co-investment agreements with any limited partners or third parties?
6.16 Describe the Funds’ accounting methods and internal responsibility for such.
6.17 What is the General Partner’s distribution policy?
7 Fees:
7.1 Describe the Management Fee payable to the General Partner.
7.2 Describe fees, other than the Management Fee, charged to Limited Partners or portfolio companies.
7.3 Describe the calculation of the General Partner’s carried interest.
7.4 Is promote allocated on a deal-by-deal basis?
7.5 What are the clawback provisions of the Funds?
7.6 Is the General Partner prohibited from transferring its carried interest to a third party?
7.7 Is there a restriction on transferability (including pledging) of carried interest by members of the General Partner or
other entity that receives the carried interest?
7.8 Describe the estimated amount of organizational expenses.
7.9 Does the GP assess acquisition fees?
8 Legal and Business Continuity:
8.1 Has any principal been charged with any offenses related to investment activities within a financial organization
with the last 10 years?
8.2 Have any of the managing directors of the firm been sued during the past five years? Please summarize any
current, pending, or past litigation between the partnership and/or its limited partners, its investee companies, and
other alternative investment professionals or firms.
8.3 Describe any outstanding litigation against the manager, affiliates, prior funds or SPV’s and/or the Funds’ principals.
8.4 Is the managing entity covered by fidelity bond, errors, and omissions insurance? If yes, how much coverage do
you have?
8.5 Describe the policies regarding General Partners’ and employees personal investments.

8.6 Is the firm or any affiliated entity (including portfolio companies) currently involved in bankruptcy proceedings?
8.7 Have any of the key members of the senior management team, or any affiliated entities ever (i) filed for bankruptcy
or (ii) had any judgments entered against them involving fraud, willful misconduct, gross negligence, breach of
fiduciary duty or material violation of the securities law? If yes, please describe the circumstances.
8.8 Is there currently a drug-testing policy in place? If so, who must submit to it and how frequently is it administered?
8.9 If there is a positive result in the drug-testing process, what is the follow-up procedure?
8.10 Is there currently a background check policy and review process in place? If so, who must submit to it and how
frequently is it administered?
8.11 Is the management entity covered by errors and omissions insurance? How much coverage do you have? If no,
explain why.
8.12 Describe any emergency arrangements for the General Partner, the fund and related entities to cover major
business interruptions such as fire, flood, etc. (ie: disaster recovery plan). Has your firm ever managed an
investment in a crisis? Please give a brief description.
Exhibits:
Exhibit A: List of LP’s in the previous fund.
Exhibit B: Organizational Chart if no room in Questionnaire.
Exhibit C: Investment and Management Team Biographies.
Exhibit D: Due Diligence Memorandum.
Exhibit E: Due Diligence Checklists, Questionnaires, Internal Reports and Financial Models.
Exhibit F: Recent Write-Up for the Investment Committee.
Exhibit G: Deal Source Break Out by Percentage.
Exhibit H: Reference List (Portfolio company execs, co-investors, bankers, lawyers, fund accountants, institutional
investor references).
Exhibit I: Portfolio Company Profiles. See attached TEMPLATE.
Exhibit J: Fund Data Spread Sheet.
Exhibit K: Valuation Policy.
Exhibit L: LPA Ratings Work Sheet. See attached work sheet.
Exhibit M: Investor Reports.
Exhibit N: Capital Call and Distribution Notices.
Exhibit O: Operating Budget.
Exhibit P: Compliance Manual, Employee Handbook and the Employee Code of Professional Conduct
Exhibit Q: Performance for Predecessor Funds, including fund cash flows and value creation metrics or charts, including
to what extent returns are generated by revenue growth, improved margins, deleveraging and multiple expansion.
Exhibit R: Portfolio company information including but not limited to entry and exit revenue, net income, leverage and
price multiple.