Aditum Alternatives’ mission is to expand private and individual investor access to non-traditional investments.
We advise clients on the design, engineering, operation and distribution of alternative, non-traditional investment products, and develop intellectual property for our clients’ use.
The Aditum Aqueduct is a patent pending innovation for registered ’40 Act funds employing private market investment strategies, such as private equity and private credit. The Aditum Aqueduct is comprised of both novel investment product structures and enabling technologies, that offer:
Direct or Indirect Control of Liquid Assets, eliminating cash drag1,
Capital Efficiency without excessive over-commitment1 and its attendant risk,
expanded Exit Liquidity opportunities for investors, and
Capital-Cycle Management over multiple private market investment periods.
The Aditum Aqueduct provides these features:
For more information, please e-mail us at Aqueduct@AditumAlts.com.
1For example, one ’40 Act registered private equity fund of funds has oscillated between cash drag and excessive over-commitment. The fund reported investments in money market funds and CDs (i.e cash equivalents that reduce overall investment returns, creating cash drag) amounting to 28% of NAV as of March 31, 2018. The same fund as of March 31, 2019 and September 30, 2019 was excessively over-committed, reporting unfunded commitments of $732M and $729M, 472% and 789% of the fund’s liquid assets available at those respective times to meet unfunded commitments. As of Sept. 30, 2020 this fund had unfunded commitments of $505M, 952% of the fund’s $53M in net liquid assets.
Over-commitment introduces the risk that a fund may be forced to sell illiquid assets under duress, or default in response to receiving a capital call in an amount greater than its available liquid assets. Some funds without adequate liquid assets may seek to respond to capital calls by borrowing (if able), thus increasing leverage on an asset class that is already levered 5x-8x and significantly increasing the fund’s operational complexity due to the collateral requirements engendered by borrowing.
Commitment vintages are an optional feature of the patent-pending Aditum Aqueduct, implemented in Private Market Master Funds via the concept of unfunded investor commitment per share (unit UIC).
A commitment vintage with a higher unit UIC will result in fewer Private Market Master Fund shares being issued and less capital being contributed at subscription, with more capital contributed subsequently in response to capital calls. Over time as capital is called, the unit UIC of the later commitment vintage will approach parity with the unit UIC of earlier commitment vintages.
To limit dilution, a new commitment vintage (with a much higher unit UIC than the most recent vintage) should be created whenever a Private Market Master Fund intends on accepting significant new commitments.
The diagram below shows this approach as applied to a primary-focused Private Market Master Fund which continues to accumulate assets and enjoy increasing economies of scale over the course of succeeding vintages, while limiting dilution of existing investors.