What is the advisory committee?

The Advisory Committee plays a boarding role for an investment fund. It is the supervisory body of the investment fund, an entity composed of persons who do not belong to management but who share the same interest in the success of all.

Unlike a board that may include experts outside a company, the advisory committee is composed only of investors from the investment fund. Market recommendations encourage managers to include in their board the diversity of its investors: small and large, experienced and amateur, private and public, institutional and family office ... In fact, managers often include the five to seven largest investors, in order to build close relationships with them, and to reward their key investors.

The Advisory Committee shall meet at least once every six months to make a general update on the situation of the fund. Management may request more frequent meetings, either to consult members on a strategic orientation, or to obtain their approval on a decision outside the manager's competence.

The Advisory Committee intervenes to authorise management to take decisions restricted by the rules of the fund. If the manager identifies an investment opportunity outside the framework authorised by the Regulation, the fund may seize it if it has obtained the approval of the committee.

The opportunity may be outside the framework initially provided for in the Regulation. It can overflow by its amount (the entry ticket being too large for the fund), by its geography (the opportunity is, for example, in Belgium, when the fund must invest only in France), by its sector (an opportunity in the B2C, whereas the fund had to do only B2B), by its maturity, by its management ... The advisory committee intervenes in the event of a conflict of interest to authorize the manager to take a decision for which it would have been a party. Finally, it must also represent the interest of investors when strategic decisions are to be taken: postpone the end of the investment period, reopen the subscription period, etc.

The committee ensures that the interests of the manager and investors are aligned. Managers are already very powerful in an investment fund, unlike a traditional company. There must be no abuse of power to the detriment of investors. For any decision, the manager must defend the rationality and economic justifications of the decisions to be decided. If he succeeds in convincing that the decision is in the interest of all, the members of the committee will vote in favour.

Moreover, the Committee is not composed solely of a voting member. He may admit sits, observers who will not have the right to vote, but may be present to take part in the discussions.

Being a member of the advisory committee can be key to an investor’s strategy. This privileged place gives it unprecedented access to managers and the investment fund. By building a strong relationship, he will have access to new opportunities, new information, crucial corridor conversations. His knowledge of the fund’s portfolio and strategy will be much more refined than that of a passive investor. A good investor will benefit.

For the manager, the composition of his committee is not trivial. It strengthens its ties with its investors. The latter will be more likely to reinvest in the next fund. A good manager will always put the funds on his committee. Moreover, by putting well-made heads on its committee, it must live up to expectations. He will not be able to afford a weak argument to make any decision.

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