Yes. LPs often require the operator/GP has skin in the game. This means the LP and their investment governance requires that there’s a maximum limit in terms of what percentage of equity they can invest. LPs also understand how this incentivizes solid performance. To this end, MPI often undergoes KYC (Know your Client) and AML (Anti Money Laundering) diligence checks by the LP as well as having the Operating Agreement of the GP entity reviewed by the LP in advance of closing.

1. i. Needs-Based Operators: In this scenario, an Operator/ Sponsor has hit an inflection point in the growth of their business and with an abundance of LP equity capital pursuing them, they need to supplement their own balance sheet in order to capitalize on the For example, Private Equity Fund ‘X’ programmatically allocates $100 Million of equity to help a GP scale their business. Under a 90%/10% contribution scenario, the GP must come up with $10 Million they simply do not have. This is where MPI comes in to bridge the gap.​
2. Financial Engineering Operators: Another distinct subset of MPI partners are those Operators who have the requisite balance sheet capital to fund their GP equity requirements but see value in laying off a piece of their exposure to a passive third-party who retains less than a pro-rata share of the promote, thus promoting them within the promote and allowing their internal capital to work more efficiently. These Operators view a MPI partnership as a strategic arbitrage opportunity.​

MPI’s programmatic investment structures allow sponsors to spend more time focusing on successful business plan execution (thus maximizing promote potential) and less time raising equity from friends and family to fund their capital imbalances. The MPI platform is designed to let each participant focus on what they do best, giving the collective a higher probability of success.​

The Co-GP investment space is fractured and exceedingly inefficient. Because the investment mandate is so narrow and the investment size per transaction so small relative to traditional LP interests, MPI’s Partners have had to approach a large amount of Sponsors in order to find a handful that are a good fit.​

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Recently, MPI has noticed the advent of smaller private equity funds that offer a preferred return as well as a a bigger percentage of the waterfall distribution. This structure is very similar to MPI’s co-GP structure, but many of these smaller private equity funds are targeting smaller deals ($5mm-$15MM) which limits there investment reach.​

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For the large institutional Fund investors keenly focused on growing Assets Under Management (“AUM”) the check size per deal is simply too small to warrant the time/effort.​

MPI targets investments that allow us to fully carry out our business plan within 3-5 years, which allows for the opportunity to exit a deal within 5-7 years. Given that MPI does not utilize a structured fund, we are not limited by the typically longevity constraint that most funds face. ​

In a common equity joint venture, ALL equity participants (LP and GP alike) receive their capital back pro-rata at the same time. After such return of principal and an initial hurdle rate to all equity, the “promote” commences.​