What is a key person?

Key people, or Key Person, are key managers to succeed an investment fund. Their work is the core of the value of a fund.

Investment funds are not traditional commercial companies: their success is not based on a magical recipe such as a soda manufacturer, on a brand such as a perfumer, a production tool, patents, engineers, etc. Their success is based only on the skills of a handful of people, their ability to pay opportunities well and resell them, in order to generate a greater value for investors.

Investment funds are therefore the only capitalist entities to list their key individuals in the statutes of their fund, in order to make as much secure as possible the presence of these key managers. Investors want to be sure that the key manager will not disappear, leaving their money in the hands of a less experienced person.

Key people vary according to each fund: top management is always a matter of responsibility. Sometimes there is only one key person, sometimes they are two or three, but rarely more. This group must not be too restrictive, at the risk of forgetting an essential person, or too large, at the risk of including second knives and diluting the determining people.

Alas, no one is eternal. The question of replacing a key person will necessarily arise: the manager retires or goes to work for a competitor, or even is incapacitated or dies in the worst cases. At best, the departure is at a time when the fund has not yet been raised or is approaching its liquidation. In the event of a start in full operation, the subscription period is in principle suspended: the fund must not be able to make new investments without the agreement of the Advisory Committee.

The fund then enters a period of uncertainty during which managers still in place will try to convince their investors that replacement is possible. If investors approve the replacement, because the applicant has equivalent qualities to the date, the subscription period may resume. Otherwise, the fund will have to cease operations, manage the remaining management holdings and plan for its liquidation.

Key people, who are well appointed, therefore play a key role in the success of the fund, even in its sustainability.

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