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Private Market
Jan 10, 2025|ByIsabelle Rucart, CFA, PRM
Solving for the investment gap
Private assets are a crucial part of portfolio construction – and one of the fastest-growing asset class across global capital markets. For example, out of all U.S. companies generating over $100M of revenue annually, 88% are private companies, representing a major investment opportunity to seize. We illustrate this trend in the latest version of our Student of the Private Markets.
A number of analyses ran by the BlackRock Alternative Portfolio Solutions team have also concluded that adding private markets to public portfolios may enhance their risk-return profiles.
Illustrative historical performance comparison when including 15% private markets into a 60/40 portfolio
Risk is calculated using 195 months of equal weighted return data from Dec 31, 2007 to Mar 28, 2024. Source: BlackRock, Q1 2024. This presentation contains back-tested index data for the indexes above. Unless otherwise noted, index returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Hypothetical data results are shown with the benefit of hindsight and knowledge of factors that may have positively affected their performance, and cannot account for risk factors that may affect actual performance. The actual performance of a product or strategy may vary significantly from the hypothetical index performance due to transaction costs, liquidity or other market factors. The Private Equity and Private Credit benchmarks are sourced from Preqin, calculated using performance information for over 10,000 private capital funds.
And yet, as discussed in our joint paper with Partners Group “Solving the private markets allocation gap: From products to portfolio construction,” wealth portfolios have historically underinvested in private markets, largely due to concerns around operational complexity and illiquidity.
Semi-liquid evergreen structures, such as the BlackRock Private Investments Fund (BPIF) and BlackRock Private Credit Fund (BDEBT) are examples of vehicles that allow wealth practitioners to build and maintain meaningful allocations to private markets.
Portfolio Construction
How much illiquidity risk can you take?
As explained in “Exploring beyond the 60-40 portfolio,” one of the first questions to address is how much illiquidity an investor should introduce in their portfolio. We recommend preparing a comprehensive plan to manage liquidity risk, market risk, and manager risk. This analysis depends not only on obvious factors, such as spending needs and time horizon, but also on the current risk profile of an investor’s public portfolio and the liquidity mechanisms of private markets instruments they consider using.
Example of liquidity mapping, assuming a 60-40 liquid portfolio and drawdown private funds
Source: BlackRock Alternative Portfolio Solutions team, Exploring beyond the 60-40 portfolio, 2023
What outcomes are you targeting?
Wealth investors should adopt a holistic portfolio strategy when investing in private markets, focusing on desired outcomes at the whole portfolio level. Investors should carefully select and combine asset classes they will use in their private market sleeves accordingly. Said differently, growth-oriented portfolio and income-oriented portfolios won’t be made up of the same private market asset classes.
How to implement private markets solutions efficiently?
Achieving success in private markets investing involves further skills, such as capturing relative value opportunities across asset classes, ensuring consistent deployment, and diversifying across assets and managers. The BlackRock Alternative Portfolio Solutions team leverages an eleven-year track record building private market portfolios to deliver solutions for wealth investors. We have partnered with the AI Lab at Stanford to design proprietary analytics to model private markets cash flows. We co-invest alongside other BlackRock investment teams and take an open architecture approach when selecting funds.
We are now working with wire houses, independent broker-dealers, platforms, private banks and large RIAs to co-create custom private markets solutions tailored to their unique liquidity needs and target outcomes. We are also designing solutions on the shelf, not only for model users – such as our partnership with Partners Group and the work we are doing with RIAs to include private markets into Custom Model Solutions – but also for fund buyers, who may want to invest into one single ticker, providing them access to a diversified private market portfolio.
Explore the Student of the Private Markets presentation – BlackRock’s quarterly piece that shares the latest valuation trends based on BlackRock’s Capital Markets Assumptions.
Isabelle Rucart, CFA, PRM
Director, Product Strategist for the BlackRock Multi-Alternatives team
Isabelle Rucart, CFA, PRM, Director, is responsible for fundraising and product development on private markets solutions designed for Wealth and Institutional clients in the US, Canada and Latin America.
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This material is provided for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are subject to change. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Reliance upon information in this material is at the sole risk and discretion of the reader. The material was prepared without regard to specific objectives, financial situation or needs of any investor
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Capital at risk: All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.
Past Performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. You may not get back the amount originally invested. Asset allocation and diversification strategies do not guarantee profit and may not protect against loss. Risk management and due diligence processes seek to mitigate, but cannot eliminate, risk nor do they imply low risk. Investment involves risk, including a risk of total loss. Indexes are unmanaged, are used for illustrative purposes only and are not intended to be indicative of any fund’s performance. It is not possible to invest directly in an index.
All investments risk the loss of capital. An investment in the Platform is speculative and involves significant risks, including volatility of the Platform’s performance and the possibility of partial or total loss of an investor’s investment, and is subject to a variety of risks and investment considerations that relate to specific assets in which it will invest or markets or industries in general. As the specific portfolio composition for the Platform is difficult to predict, it is not possible to articulate all the risk factors that may be relevant to an investment in the Platform. However, some of the risks associated with an investment in the Platform include, but are not limited to, reliance on the Investment Manager, lack of diversification, leverage, the Platform’s lack of an operating history and lack of transferability of interests. There is no public market for the purchase and sale of interests and none is expected to develop. The Platform is also subject to certain regulatory limitations and constraints on investments. Risks relating to the Investments include the various investment risks inherent in US and non-US investments, low credit quality securities, illiquid investments, short selling, option transactions, non-US exchanges and securities lending.
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BLACKROCK PRIVATE CREDIT FUND (“BDEBT”)
Investors should consider the Fund’s investment objective, risks, charges and expenses carefully before investing. This and other information about the Fund can be found in the Fund’s current prospectus (the “Prospectus”). The Prospectus should be read carefully before investing. Copies of the Fund's prospectus may be obtained on the SEC EDGAR website.
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The Fund’s investment program entails risk. There can be no assurance that the investment objective of the Fund will be achieved or that itsinvestment program will be successful.
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Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus.
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Investing involves risk, including possible loss of principal.
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An investment in the Fund involves a high degree of risk and should be considered speculative. You could lose some or all of your investment.
International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation, and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are often heightened for investments in emerging/developing markets or smaller capital markets
The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.
The Fund does not intend to list its shares on any securities exchange, and the Fund does not expect any secondary market to develop for the shares. The Fund is designed for long-term investors and an investment in the shares should be considered illiquid. Investors should consider their investment goals, time horizons and risk tolerance before investing in the Fund
While the amount of the Fund’s net assets allocated to private investments may vary over time, BlackRock Capital Investment Advisors, LLC (the “Advisor”) anticipates allocating at least 80% of the Fund’s total assets (net assets plus borrowings for investment purposes) to these types of investments. See “Risk Factors —Our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment — Private Investments Risk”, and “Risk Factors —As required by the 1940 Act, a significant portion of our investment portfolio is and will be recorded at fair value as determined in good faith and, as a result, there is and will be uncertainty as to the value of our portfolio investments” and “ Determination of Net Asset Value” in the prospectus.
Distribution payments are not guaranteed, and BlackRock Private Credit Fund may pay distributions from sources other than cash flow from operations, including, without limitation, the sale of assets, borrowings, return of capital or offering proceeds, and advances or the deferral of fees and expense reimbursements, and that BlackRock Private Credit Fund has no limits on such amounts it may pay from such sources.
Neither the Securities and Exchange Commission nor any state securities regulator has approved or disapproved of these securities or determined if the Fund’s prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Securities regulators have also not passed upon whether this offering can be sold in compliance with existing or future suitability or conduct standards including the ‘Regulation Best Interest’ standard to any or all purchasers.
Risks:
Investing in our Common Shares involves a high degree of risk. You should purchase these securities only if you can afford a complete loss of your investment. See “Risk Factors”in the Fund prospectus. Also consider the following:
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We have limited operating history and there is no assurance that we will achieve our investment objective.
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This is a “blind pool” offering and thus you will not have the opportunity to evaluate our investments before we make them.
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You should not expect to be able to sell your shares regardless of how we perform.
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You should consider that you may not have access to the money you invest for an extended period of time.
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We do not intend to list our shares on any securities exchange, and we do not expect a secondary market in our shares to develop prior to any listing. • Because youmay be unable to sell your shares, you will be unable to reduce your exposure in any market downturn.
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We intend to implement a share repurchase program, but only a limited number of shares will be eligible for repurchase and repurchases will be subject to available liquidity and other significant restrictions.
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An investment in our Common Shares is not suitable for you if you need access to the money you invest. See “Suitability Standards” and “Share Repurchase Program.”
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We cannot guarantee that we will make distributions, and if we do we may fund such distributions from sources other than cash flow from operations, including, without limitation, the sale of assets, borrowings, return of capital or offering proceeds, and we have no limits on the amounts we may pay from such sources.
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Distributions may also be funded in significant part, directly or indirectly, from temporary waivers or expense reimbursements borne by the Adviser or its affiliates, that may be subject to reimbursement to the Adviser or its affiliates. The repayment of any amounts owed to our affiliates will reduce future distributions to which you would otherwise be entitled.
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We expect to use leverage, which will magnify the potential for loss on amounts invested in us.
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We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Shares less attractive to investors.
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We intend to invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may also be illiquid and difficult to value.
Risks associated with an investment in the Fund include, but are not limited to, the following:
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Fixed income: Two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds/debt. Credit risk refers to the possibility that the issuer of the bond/ debt will not be able to repay the principal and make interest payments. Changes in interest rates may also adversely affect the value or profitability of the assets of the Fund. Changes in the general level of interest rates may impact the Fund's profitability by affecting the spread between, amongst other things, the income on its assets and the expense of any interest-bearing liabilities.
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Credit risk: The Fund invests in fixed interest and debt securities issued by companies. There is a risk of default where the issuing company may not pay income or repay capital to the Fund when due.
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Liquidity Risk: The vast majority of the securities or instruments invested in by a Fund will not be listed on an exchange consequently liquidity will be low or non-existent. Low liquidity often causes the value of these investments to be less predictable. In extreme cases, the Fund may not be able to realize the investment at the latest market price or at a price considered fair.
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Loans: Subordinated Claims: Although it is intended that the investments will generally be secured, the claims of the Fund against a borrower in respect of an Investment may in some instances be subordinated to those of other secured creditors. The assets of the portfolio may include first lien senior secured debt, and may also include subordinated instruments (including second lien, and unitranche debt) which involves a higher degree of risk of a loss of capital.
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Risks Associated with Investments in Medium Sized Companies: The Fund will, in accordance with the investment strategy of the Fund, invest in privately-originated loans and invest in privately and publicly held North American issuers with enterprise value between USD100m and USD1.5bn, some of which may be categorized as medium sized entities. Investments in such medium-sized enterprises involve a number of risks generally associated with other types of loans described in the product prospectus.
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Concentration Risk: Investment risk is concentrated in North America. This means the Fund is more sensitive to any localized economic, market, political or regulatory events, in that region. A Fund may at certain times hold relatively few investments or have a significant exposure to a single issuer, counterparty or asset. A Fund could be subject to significant losses if it holds a large position in a particular investment that declines in value or is otherwise adversely affected, including default of the issuer or counterparty.
Definitions:
Floating rate investments typically provide adjustable coupons that increase when interest rates rise and provide floors when they decline.
Fair value is generally defined as the amount for which an investment would be sold in an orderly transaction between market participants at the measurement date. All investments are valued at least monthly based on quotations or other affirmative pricing from independent third-party sources, with the exception of investments priced directly by the Investment Adviser which in the aggregate comprise less than 5% of the capitalization of the Fund. Investments listed on a recognized exchange or market quotation system, whether U.S. or foreign, are valued using the closing price on the date of valuation.
BLACKROCK PRIVATE INVESTMENT FUND (“BPIF”)
Investors should consider the Fund’s investment objective, risks, charges and expenses carefully before investing. This and other information about the Fund can be found in the Fund’s current prospectus (the “Prospectus”), which can be obtained by contacting BlackRock at 800-882-0052. The Prospectus should be read carefully before investing.
The Fund’s investment program entails risk. There can be no assurance that the investment objective of the Fund will be achieved or that its investment program will be successful. A summary of certain risks associated with an investment in the Fund is set forth below and on the following pages. It is not complete and you should read and consider carefully the more detailed description of the risks associated with an investment in the Fund described in the Fund’s Prospectus before purchasing Shares. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus.
Closed-End Fund; Illiquidity of Shares. The Fund is designed primarily for long-term investors. An investment in the Shares, unlike an investment in a traditional listed closed-end fund, should be considered illiquid. The Shares are appropriate only for investors who are comfortable with an investment in less liquid or illiquid portfolio investments within an illiquid fund. An investment in the Shares is not suitable for investors who need access to the money they invest. Unlike open-end funds (commonly known as mutual funds), which generally permit redemptions on a daily basis, the Shares will not be redeemable at an investor’s option. Unlike stock of listed closed-end funds, the Shares are not listed, and are not expected to be listed, for trading on any securities exchange, and the Fund does not expect any secondary market to develop for the Shares in the foreseeable future. The NAV of the Shares may be volatile and the Fund’s use of leverage, if any, will increase this volatility. As the Shares are not traded, investors may not be able to dispose of their investment in the Fund when or in the amount desired, no matter how the Fund performs. Risks Associated with Private Company Investments. Private companies are generally not subject to SEC reporting requirements, are not required to maintain their accounting records in accordance with generally accepted accounting principles, and are not required to maintain effective internal controls over financial reporting. As a result, the Sub-Advisor may not have timely or accurate information about the business, financial condition and results of operations of the private companies in which the Fund invests. There is risk that the Fund may invest on the basis of incomplete or inaccurate information, which may adversely affect the Fund’s investment performance. Private companies in which the Fund may invest may have limited financial resources, shorter operating histories, more asset concentration risk, narrower product lines and smaller market shares than larger businesses, which tend to render such private companies more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. These companies generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. These companies may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity. In addition, the Fund’s investment also may be structured as pay-in-kind securities with minimal or no cash interest or dividends until the company meets certain growth and liquidity objectives. Typically, investments in private companies are in restricted securities that are not traded in public markets and subject to substantial holding periods, so that the Fund may not be able to resell some of its holdings for extended periods, which may be several years. There can be no assurance that the Fund will be able to realize the value of private company investments in a timely manner. Pre-IPO Securities Risk. Investments in pre-IPO securities involve greater risks than investments in shares of companies that have traded publicly on an exchange for extended periods of time. These investments may present significant opportunities for capital appreciation but involve a high degree of risk that may result in significant decreases in the value of these investments. Issuers of pre-IPO securities may not have established products, experienced management or earnings history. The Fund may not be able to sell such investments when the Advisor and/or the Sub-Advisor deems it appropriate to do so because they are not publicly traded. As such, these investments are generally considered to be illiquid until a company’s public offering (which may never occur) and are often subject to additional contractual restrictions on resale following any public offering that may prevent the Fund from selling its shares of these companies for a period of time. Market conditions, developments within a company, investor perception or regulatory decisions may adversely affect an issuer of pre-IPO securities and delay or prevent such an issuer from ultimately offering its securities to the public. If a company does issue shares in an IPO, IPOs are risky and volatile and may cause the value of the Fund’s investment to decrease significantly. Preferred Securities Risk. There are special risks associated with investing in preferred securities, including deferral, subordination, limited voting rights, special redemption rights, risks associated with trust preferred securities and risks associated with new types of securities. Convertible Securities Risk. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. The market values of convertible securities tend to decline as interest rates increase and,
conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security exceeds the conversion price, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible security tends to trade increasingly on a yield basis and thus may not decline in price to the same extent as the underlying common stock. Synthetic convertible securities are subject to additional risks, including risks associated with derivatives. Warrants and Rights Risk. If the price of the underlying stock does not rise above the exercise price before the warrant expires, the warrant generally expires without any value and the Fund loses any amount it paid for the warrant. Thus, investments in warrants may involve substantially more risk than investments in common stock. Warrants may trade in the same markets as their underlying stock; however, the price of the warrant does not necessarily move with the price of the underlying stock. The failure to exercise subscription rights to purchase common stock would result in the dilution of the Fund’s interest in the issuing company. The market for such rights is not well developed, and accordingly the Fund may not always realize full value on the sale of rights. Risks Relating to Dispositions of Portfolio Company Investments Held Through a Separate Entity. In connection with the disposition of an investment in a Portfolio Company, the legal entity that is the holder of the interests in the Portfolio Company may be required to make representations and warranties about the business and financial affairs of such Portfolio Company typical of those made in connection with the sale of any business. The interest holder may also be required to indemnifythe purchasers of such Portfolio Company to the extent that any such representations or warranties turn out to be inaccurate or misleading. These arrangements may result in liabilities for the interest holder, and thus possibly for the Fund, depending upon recontribution obligations owed to the legal entity that is the holder of the interest. The Fund may face similar risks with respect to dispositions of its Direct Investments it holds directly. 5 USWAM1224U/S-4101362-5/7
Co-Investment Transactions Risk. The Fund may co-invest alongside third-party co-investors, including through joint ventures or other entities, or with private equity funds in so-called “club deals.” Such investments may involve risks not present in investments where third parties are not involved, including the possibility that a co-investor may at any time have economic or business interests or goals which are inconsistent with those of the Fund, may take a different view than that of the Sub-Advisor as to the appropriate strategy for a co-investment, may be in a position to take action contrary to the Fund’s investment objective or may become bankrupt or otherwise default on their obligations. Further, in the case of co-investments that are made available to the Fund by a third party private equity sponsor, it is expected that the sponsor generally will have the ability to exercise control over the transaction. In addition, because one or more Portfolio Funds in which the Fund may hold an interest may invest in any particular club deal, the Fund may be more exposed to the risks associated with the underlying Portfolio Company than it would otherwise prefer. In some cases, the Fund may pay fees such as placement fees, management fees, administrative fees and/or performance fees to private equity sponsors in connection with a co-investment transaction in which the Fund participates, which fees would be in addition to the fees charged to the Fund by the Advisor and would be indirectly borne by investors in the Fund. Risks Relating to Acquiring Secondary Investments. The Fund may acquire Secondary Investments in Portfolio Funds from existing investors in such Portfolio Funds. In such cases, the Fund will not have the opportunity to negotiate the terms of its interests in Portfolio Funds acquired in a secondary transaction, including any special rights or privileges. In addition, valuation of interests in Portfolio Funds acquired in a secondary transaction may be difficult, since there generally will be no established market for such interests or for the securities of Portfolio Companies which such Portfolio Funds may own. Moreover, the purchase price paid for a Secondary Investment is subject to negotiation with the seller of such interest. The overall performance of the Fund may depend in part on the acquisition price paid by the Fund for its Secondary Investments and the structure of such acquisitions. The Sub-Advisor may have the opportunity to acquire, for the account of the Fund, a portfolio of Secondary Investments from a seller on an “all or nothing” basis. In some such cases, certain of the Secondary Investments in the portfolio may be less attractive than others, and certain of the managers of the Portfolio Funds in which interests will be acquired in a secondary transaction may be more experienced or highly regarded than others. Investments in sponsor-led continuation vehicles involve many of the risks associated with a primary investment in a Portfolio Fund, although such investments are not anticipated to be made on a “blind pool” basis. Portfolio Fund Risks. The Fund’s investments in Portfolio Funds are subject to a number of risks, including:
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Portfolio Fund interests held by the Fund expected to be illiquid, their marketability may be restricted and the realization of investments from them may take considerable time and/or be costly.
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Portfolio Fund interests are ordinarily valued based upon valuations provided by the Portfolio Fund Managers, which may be received on a delayed basis. Certain securities in which the Portfolio Funds invest may not have a readily ascertainable market price and are fair valued by the Portfolio Fund Managers. A Portfolio Fund Manager may face a conflict of interest in valuing such securities since their values may have an impact on the Portfolio Fund Manager’s compensation. The Fund intends to invest in Portfolio Funds that require an annual independent audit of their financial statements, which includes testing of portfolio valuations made by the PortfolioFund Manager. The Sub-Advisor will review and perform due diligence on the valuation procedures used by each Portfolio Fund Manager and monitor the returns provided by the Portfolio Funds. However, neither the Sub-Advisor nor the Board is able to confirm the accuracy of valuations provided by Portfolio Fund Managers. Inaccurate valuations provided by Portfolio Funds could materially adversely affect the value of Shares.
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The Fund may pay asset-based fees and performance-based fees in respect of its interests in Portfolio Funds. Such fees and performance-based compensation are in addition to the fees charged to the Fund by the Advisor. Moreover, an investor in the Fund will indirectly bear a proportionate share of the expenses of the Portfolio Funds, in addition to its proportionate share of the expenses of the Fund. Thus, an investor in the Fund may be subject to higher operating expenses than if the investor invested in the Portfolio Funds directly. Investors could avoid the additional level of fees and expenses of the Fund by investing directly with the Portfolio Funds, although access to many Portfolio Funds may be limited or unavailable and may not be permitted for investors who do not meet the substantial minimum net worth and other criteria for investment in Portfolio Funds.
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Performance-based fees charged by Portfolio Fund Managers may create incentives for the Portfolio Fund Managers to make risky investments, and may be payable by the Fund to a Portfolio Fund Manager based on a Portfolio Fund’s positive returns even if the Fund’s overall returns are negative.
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Portfolio Funds generally are not registered as investment companies under the Investment Company Act; therefore, the Fund, as an investor in Portfolio Funds, will not have the benefit of the protections afforded by the Investment Company Act. Portfolio Fund Managers may not be registered as investment advisers under the Investment Advisers Act of 1940 (the “Advisers Act”), in which case the Fund, as an investor in Portfolio Funds managed by such Portfolio Fund Managers, willnot have the benefit of certain of the protections afforded by the Advisers Act.
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Some of Portfolio Funds in which the Fund will invest may have only limited operating histories.
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There is a risk that the Fund may be precluded from acquiring interests in certain Portfolio Funds due to regulatory implications under the Investment Company Act or other laws, rules and regulations or may be limited in the amount it can invest in voting securities of Portfolio Funds. For example, the Fund is required to disclose the names and current fair market value of its investments in Portfolio Funds on a periodic basis, and a Portfolio Fund may object to public disclosure concerning the Fund’s investment and the valuation of such investment. Similarly, because of the Sub-Advisor’s actual and potential fiduciary duties to its current and future clients, the Sub-Advisor may limit the Fund’s ability to access or invest in certain Portfolio Funds. For example, the Sub-Advisor may believe that the Fund’s disclosure obligations or other regulatory implications under the Investment Company Act may adversely affect the ability of such other clients to access, or invest in, a Portfolio Fund. Furthermore, an investment by the Fund could cause the Fund and other funds managed or sub-advised by the Sub-Advisor to become affiliated persons of a Portfolio Fund under the Investment Company Act and prevent them from engaging in certain transactions. The Fund may forego certain voting rights with respect to the Portfolio Funds in an effort to avoid “affiliated person” status under the Investment Company Act. The Sub-Advisor may also refrain from including a Portfolio Fund in the Fund’s portfolio in order to address adverse regulatory implications that would arise under the Investment Company Act for the Fund and the Sub-Advisor’s other clients if such an investment was made. In addition, the Fund’s ability to invest may be affected by considerations under other laws, rules or regulations. Such regulatory restrictions, including those arising under the Investment Company Act, may cause the Fund to invest in different Portfolio Funds than other clients of the Sub-Advisor. Although the Sub-Advisor will seek to receive detailed information from each Portfolio Fund regarding its historical performance and business strategy, in most cases the Sub-Advisor will have little or no means of independently verifying this information. A Portfolio Fund may use proprietary investment strategies that are not fully disclosed to the Sub-Advisor, which may involve risks under some market conditions that are not anticipated by the Sub-Advisor.
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The Fund may receive from a Portfolio Fund an in-kind distribution of securities that may be illiquid or difficult to value and difficult to dispose of. • The Fund may be required to make incremental contributions pursuant to capital calls issued from time to time by a Portfolio Fund. The Fund expects to allocate a portion of its Managed Assets to the Income-Focused Sleeve in part for the purpose of funding capital calls.
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If the Fund fails to satisfy capital calls to a Portfolio Fund in a timely manner then, generally, it will be subject to significant penalties, including the complete forfeiture of the Fund’s investment in the Portfolio Fund. Any failure by the Fund to make timely capital contributions may (i) impair the ability of the Fund to pursue its investment program, (ii) force the Fund to borrow, (iii) cause the Fund to be subject to certain penalties from the Portfolio Funds, or (iv) otherwise impair the value of the Fund’s investments (including the devaluation of the Fund).
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A Portfolio Fund Manager may focus on a particular industry or sector, which may subject the Portfolio Fund, and thus the Fund, to greater risk and volatility than if investments had been made in issuers in a broader range of industries. Likewise, a Portfolio Fund Manager may focus on a particular country or geographic region, which may subject the Portfolio Fund, and thus the Fund, to greater risk and volatility than if investments had been made in issuers in a broader range of geographic regions.
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Portfolio Funds in which the Fund will acquire an interest may pursue different strategies or establish positions in different geographic regions or industries that, depending on market conditions, could experience offsetting returns.
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Although the Fund will be an investor in the Portfolio Funds, investors in the Fund will not themselves be equity holders of the Portfolio Funds and will not be entitled to enforce any rights directly against the Portfolio Funds or the Portfolio Fund Managers or assert claims directly against the Portfolio Funds, the Portfolio Fund Managers or their respective affiliates. Shareholders will have no right to receive the information issued by the Portfolio Funds that may be available to the Fund as an investor in the Portfolio Funds. Illiquid Investments and Restricted Securities Risk. Most, if not all, of the Fund’s investments made through the Private Equity Sleeve will be highly illiquid, and there can be no assurance that the Fund will be able to realize on such investments in a timely manner. Illiquidity may result from the absence of an established market for the Fund’s investments, as well as legal or contractual restrictions on their resale by the Fund. It is anticipated that almost all of the Portfolio Companies in which a Portfolio Fund or the Fund may invest will be subject to restrictions on sale by the relevant Portfolio Fund or the Fund, as applicable, because they were acquired from the issuer in “private placement” transactions. In addition, the Fund’s investments by their nature are often difficult or time consuming to liquidate. Investments in Non-Voting Stock. The Fund may hold its investment in a Portfolio Company or Portfolio Fund in whole or in part in non-voting form in order to avoid being deemed to be an “affiliated person” of such Portfolio Company or Portfolio Fund within the meaning of the Investment Company Act. To the extent the Fund invests in non-voting securities or contractually waives the right to vote, the Fund will not be able to vote on matters that may be adverse to the Fund’s interests, which may consequently adversely affect the Fund and its investors. Non-Diversified Status. The Fund is a non-diversified fund. As defined in the Investment Company Act, a non-diversified fund may invest a significant part of its investments in a smaller number of issuers than can a diversified fund. Having a larger percentage of assets in a smaller number of issuers makes a non-diversified fund more susceptible to risk, as one single event or occurrence can have a significant adverse impact upon the Fund. Investment Risk. An investment in the Shares is subject to investment risk, including the possible loss of the entire amount that you invest. The Shares are designed for long-term investors, and the Fund should not be treated as a trading vehicle. At any point in time an investment in the Shares may be worth less than the original amount invested, even after taking into account distributions paid by the Fund. During periods in which the Fund may use leverage, the Fund’s investment and certain other risks will be magnified. Additional Risks. For additional risks relating to an investment in the Fund, including “Effect of Additional Subscriptions,” “Best-Efforts Offering Risk,” “Valuation Risk,” “Competition for Investment Opportunities,” “Non-U.S. Securities Risk,” “Emerging Markets Risk,” “Frontier Markets Risk,” “EMU and Redenomination Risk,” “Foreign Currency Risk,” “Publicly Traded Equity Securities Risk,” “Investments in ETFs,” “Subsidiary Risk,” “Fixed-Income Securities Risk,” “Yield and Ratings Risk,” “U.S. Debt Securities Risk,” “Sovereign Debt and Supranational Debt Risk,” “Corporate Bonds Risk,” “Below Investment Grade Securities Risk,” “Senior Loan Risk,” “Second Lien Loan Risk,” “Mezzanine Securities Risk,” “Bank Loans Risk,” “Risks of Loan Assignments and Participations,” “LIBOR and Other Reference Rates Risk,” “Insolvency of Issuers of Indebtedness Risk,” “Leverage Risk,” “Strategic Transactions Risk,” “Inflation Risk,” “Deflation Risk,” “Risks Associated with Recent Market Events,” “Market Disruption and Geopolitical Risk,” “Regulation and Government Intervention Risk,” “Regulation as a ‘Commodity Pool’,” “Legal, Tax and Regulatory Risks,” “Failure to Qualify as a RIC or Satisfy Distributions Requirement,” “Investment Company Act Regulations,” “Legislation Risk,” “Investment Dilution Risk,” “Potential Conflicts of Interest of the Advisor, the Sub-Advisor and Others,” “Allocation Risk,” “Decision-Making Authority Risk,” “Management Risk,” “Reliance on the Advisor and Sub-Advisor,” “Reliance on Service Providers,” “Information Technology Systems,” “Cyber Security Risk,” “Misconduct of Employees and of Service Providers,” and “Portfolio Turnover Risk,” please see “Risks” in the Prospectus. No assurance can be given that the Fund’s investment strategies will be successful or that the Fund will be able to achieve its investment objective. Accordingly, the Fund should be considered a speculative investment that entails substantial risks, and a prospective Investor should invest in the Fund only if it can sustain a complete loss of its investment. An investment in the Fund should be viewed only as part of an overall investment program. BlackRock is not making any recommendation or soliciting any action based upon the information contained herein. This information is furnished to you with the express understanding that it does not constitute: (i) an offer, solicitation or recommendation to invest in a particular investment in any jurisdiction; (ii) a means by which any such investment may be offered or sold; or (iii) advice or an expression of BlackRock’s view as to whether a particular investment is appropriate for you and meets your financial objectives. Definitions: General Partner (GP) Investment professionals responsible for oversight for a private equity fund (typically structured as a limited partnership). Typically, GPs invest only a small proportion of capital. Initial Public Offering (IPO): The initial offering of a company’s stock to the public. Limited Partner (LP): External individual or entity investors that contribute capital to a private equity fund. Mergers and acquisitions (M&A): Transactions in which companies, or portions of companies are transferred or consolidated with other entities. Buyout – purchase of an existing company or portion of a company. Venture capital -seed money and funding for start-up and early-stage companies. Buyout Mega: Fund Investment:>$10B Enterprise Value // Direct investment:>$8B Enterprise Value. Buyout Large: Fund Investment: $5B-$10B Enterprise Value // Direct investment: $3.5B-$8B Enterprise Value. Buyout Middle: Fund Investment: $750M-$5B Enterprise Value // Direct investment: $500M-$3.5B Enterprise Value. Buyout Small: Fund Investment:
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