Financial Markets and Funds partner Edward Tran spoke with Institutional Investor on considerations for investment firms looking to pursue direct investing. He noted that having the proper resources in place when sourcing deals is critical and hiring an in-house team for finding deals and conducting due diligence is important. "Institutional investors will need to have the capacity to properly conduct commercial and legal due diligence." Edward added that it often requires allocators to add staffers with new and different skill sets and experiences, but that it might be less crucial for co-investment deals as the asset managers offering the opportunity can complete some of the due diligence work necessary for decision-making.
The article cites Katten's recent report "Going Direct – The Factors Driving Direct Investment Strategies and the Barriers to Adoption," and how including pre-emptive rights, anti-dilution rights and control rights as part of the contract can help provide protections for investors as part of these deals. ("Here Are the Pitfalls When Allocators Make Direct Deals or Co-Investments," August 10, 2021)