Worked structure six · Structural Options Analysis

A co-investment not everyone can be offered.

The transaction is larger than the fund may take on its own, and the manager wants the balance placed with some of its investors and not others. Three different reasons travel in that one sentence, and only one of them is a preference.

The balance is the fund's own opportunity until a written basis says it is not. Who may be offered it is settled by four documents before it is settled by anybody's relationship.

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01 · The transaction as it arrives

The transaction is bigger than the fund. The part that will not fit is the part nobody drafted for.

Four arrivals. One is a policy written while there is nothing yet to allocate, two are a signed transaction with a balance standing against a date, and the fourth is a right granted years ago and now due.

Before there is anything to allocate

At formation, or at the first review of the allocation policy. No transaction exists and no names exist. The cheapest of the four by a wide margin, and the only one in which the order can be written with no name attached.

Signed, with the balance standing

Exclusivity is running, the fund has taken what its limits permit, and a line remains that somebody has to hold at closing. What is wanted is a shape and a list of names. What is asked back is how the size the fund took was reached.

When a letter falls due

An investor holds a right to be offered co-investment when the occasion arises. The occasion has arisen. The terms were fixed before this transaction existed, and they sit in front of any order written today.

The question as it is actually asked

Almost never "who may we offer this to". It arrives as a vehicle to be formed by Friday, a committee paper due on Monday, or one line in a diligence list at the next raise. The same question sits behind each.

The opportunity here is ordinary: a transaction the manager wants, at a size the fund may not take alone, with investors who want more of it than their commitments give them. What makes it this case is that the part the fund cannot take is still the fund's until something written says otherwise, and it leaves by a decision somebody justifies years later to holders who can count.

No manager, transaction, investor, value or date appears in this room. What transfers from one transaction to the next is the shape of the problem, and the shape is what is set down here.

02 · The structural problem

Placing the balance looks like a relationship decision. It is a disposal of the fund's own opportunity, and it is read as one.

The manager is answering one question and its documents are asking another. Both are settled in the same meeting, by the same sentence, and only one of them can still be answered afterwards.

Co-investment is a disposal before it is an offer. Within the strategy the holders subscribed to, the fund has first call on everything the manager sees, so anything beyond what the fund takes is the fund's opportunity leaving the fund. That is a permissible act. It is not a neutral one, and it requires a basis that existed before it happened.

So the balance is not a residual. It is established from documents rather than from appetite: the concentration limit, any diversification requirement, the borrowing limit, undrawn commitments actually available, reserves already committed elsewhere. None of those is a view about the transaction. Where the fund could have taken more and did not, there is no balance to place. There is an allocation, and it went outwards.

Why "not everyone" is three sentences wearing one

Some investors cannot lawfully be offered a participation. Their own regime forbids the holding, or the place the offer would be received closes the door before preference is engaged. That is not a decision the manager takes but a fact it finds, by asking a lawyer in the right place rather than by reading the register.

Some cannot practically be offered. They cannot complete their own approvals inside the timetable the transaction has, and a participation offered to a party who cannot take it is a formality with a date on it. That too is a fact, knowable in advance.

Some the manager would rather not offer. Preference is legitimate: a manager may prefer the investor whose capital it wants next time, or the party bringing a capability the transaction needs. It is the only one of the three that becomes a conflict when unwritten, and the only one that can be written in advance.

From outside, the three are indistinguishable. A holder who was not offered sees one thing: that it was not offered. The difference between a legal impossibility, a timetable and a preference exists only in a record made at the time. Made afterwards, it is the manager describing its own reasons.

Two of the three reasons write themselves, from law and from the calendar. The third can only be written before the names are known, and it is the one everybody leaves until after.

03 · What binds

Four documents bind, and the shareholders agreement is not one of them.

Four. Three sit in the manager's own drawer and can be read tonight. The fourth is published text, settled by people who are not at the table, and nothing drafted there moves it.

The allocation policy made under the constitution. The conflicts provision. The advisory committee's terms of reference. And the published definition of a collective investment fund, which decides whether the vehicle about to be formed is a second fund with a perimeter of its own.

Each one, by source and by what can move it

The allocation policy

The constitution and the policy made under it. Movable only by amendment, which reaches into the document the holders signed. The live variable is whether it was applied before the names were known or after. Ahead of it sit the letters already granting a right to be offered, spending part of the balance before anybody allocates anything.

The conflicts provision

Two instruments in two places, treated as one. The constitution says whose consent is required. The conduct rules say what the manager must itself identify and address, and are read by somebody who has never seen the constitution. A consent under the first is a permission, not a discharge of the second.

The advisory committee's role

Its terms of reference, fixed at formation. What it must be shown is a list, and a list is exhaustive. Asked to bless something the list does not reach, its blessing is worth what the list says, and the manager relying on it learns that from a stranger.

Whether the vehicle is a fund

Published text, drawn around control rather than strategy: property held for participants, participants without day-to-day control, managed as a whole, and somebody holding the permission to run it. An aggregating vehicle meets the features on the face of it, and is not outside them because it was formed for one transaction.

The two perimeters that follow

Arranging is engaged by making arrangements with a view to another person entering the transaction, whether or not anybody expressed a view. Promotion is created by every place a communication is made into and engaged by the act of communicating. They run independently, and clearing one clears nothing of the other.

Three of the four can be produced in an afternoon by somebody who knows the drawer. The fourth was engaged the moment a page describing the transaction left the building.

04 · The architectures considered

Three routes, and each of them is offered to a different list.

Three, compared on the four dimensions that decide between them: who may be offered, who has to be told, what the advisory committee is shown, and what the balance costs to carry.

Direct co-investment alongside the fund. Each participant is entered on the acquisition entity's register in its own name, signs its shareholders agreement, and holds its own consent, transfer and information rights. Nothing aggregates, and the exit requires all of them.

A dedicated co-investment vehicle. The participants subscribe into one vehicle, it holds one line on the register, and the manager stands inside it as well as beside it. One line is tidier than four, and the tidiness is bought with a second constitution and the definition question at 03.

Or the fund takes the whole line and warehouses the balance for syndication afterwards, which at the moment it is done is not co-investment at all: it is the fund holding a position it intends to sell, to parties it will choose, at a price it will produce.

A fourth answer is deliberately not on the list. Amending the concentration limit so the fund may keep the whole transaction converts a structural question into a consent, sought in the week the transaction has to close from people entitled to ask what they get for giving it.

Three routes on four dimensions. The last column never appears in the paper.

Three routes read across four dimensions: who may be offered a participation, who must be told, what the advisory committee is shown, and what the balance costs to carry while it waits
The route · the dimension	Who may be offered	Who has to be told	What the committee sees	What the balance costs while it waits
Direct participation alongside the fund	Whoever can be entered on the acquisition entity's register and sign its shareholders agreement. Its place, its holders and the timetable shorten the list before preference reaches it. Every name is visible to every other.	The fund's holders, on whatever the constitution requires, and any holder of the acquisition entity whose pre-emption right the new names engage.	The allocation itself: the size the fund took, the basis of division, each participant named beside its share. Nothing aggregates, so nothing is summarised.	Nothing is carried. The balance is taken at closing or the transaction does not close at that size. The cost is closing risk, borne by the transaction.
A dedicated co-investment vehicle	Whoever may lawfully be offered interests in a vehicle of that kind, in the place each offer is received. A shorter list, because the vehicle arrives with a tier, an offer document and a holder cap.	The fund's holders as above, and the vehicle's own subscribers. Its offer document now says something about allocation between two vehicles, and every later transaction is read against it.	One line, and one line is a summary. Who sits inside, and in what order they were admitted, lives in a second constitution the committee may have no right to read.	It must exist before it can subscribe, and forming it costs time the transaction does not have. Where it is not ready the balance falls to the third route, and nobody records that a route was chosen.
The fund takes the whole line and syndicates later	Everybody and nobody. At closing there is no offer. It comes later, at a price the manager produces, and the list is unconstrained because nothing was written down to test it against.	The holders, at the moment the fund exceeds its limit rather than when the manager intends to place the excess. A position above a limit is a breach on the day it is held.	Whatever the manager writes, when it writes it. This is the route on which the paper is drafted after the event and the event is presented as an intention.	Every day it sits, the fund carries a position above its limit, marked at the manager's own valuation, funded from its facility or from commitments called for a purpose the holders will read. If the syndication fails, the plan has become the position.

The three routes are not ranked. Each is right for a different constraint, and every constraint is knowable before any of the three is drawn. Read the second and third columns first: they are the ones a manager reads last and answers to longest. The marked cell changes a transaction rather than describing it. A balance carried is not a decision deferred. It is a decision taken, in the fund's name, before anybody has had to call it anything.

The three shapes Parallel vehicles

05 · The critical dependencies

Four dependencies, and the first has to be true before anybody is telephoned.

Each is stated against the party who can make it true and the moment it has to be true by. Three of the four are cheap while the names are unknown and cannot be bought once they are known.

That the size of the balance is established from the constitution rather than from appetite. Owned by the manager, confirmed by counsel reading the limits as written rather than as remembered, settled before the first call. Where the fund could have taken more, there is no balance to place and everything downstream describes a conflict rather than solves one.

That the offer order exists in writing before the names are known. Owned by the manager and nobody else, because it is the one dependency no adviser can hold: it states what the manager will do, not what the law requires. The letters already signed set the front of it and are not movable.

That each intended participant may receive the offer in the place it will be received. Owned by counsel qualified in that place, and answered before the first communication, because the promotion perimeter is engaged by the act of communicating and nothing drafted afterwards unengages it.

That the advisory committee is shown what its terms of reference entitle it to, at the point they entitle it. Owned by the manager. Its consent discharges the contractual requirement and stops there, and not the conduct obligation, which is owed to a reader who was not in the room.

What each costs to hold, and what it costs to restore

The first costs a morning with the constitution and a note of the arithmetic, kept. Restoring it later is not possible: the size the fund took is a fact on a signed document, and whether it could have taken more is answered by the same document from the other side.

The second costs a page written while nothing turns on it. Restored later, it is a page written by people who know which names it admits and excludes, and every reader knows that. Only one of the two versions can be shown to anybody.

The third costs a question put to the right lawyer before the deck exists; restored later it is a disclosure, which is the manager stating what happened in place of a structure that would have stopped it. The fourth costs a paper and a date in the diary.

An allocation rule written after the names are known is not a rule. It is a preference set in the typeface of one.

06 · The architecture that survives

The order is written first, and the shape is chosen last.

What the four bindings leave standing is not a preference among the routes. It is a sequence, and a rule about which decisions may know the names.

The balance is sized from the constitution and the number is dated. That number is the whole of the manager's freedom in the matter. It is arithmetic rather than judgement, which is why it is most often taken on the strength of what somebody recalls the limit to be.

The offer order is written before the names are known. At the front sit the rights already granted by letter, in the priority those letters fix, spent whether or not this transaction was in contemplation when they were signed. Behind them, the policy's stated basis: pro rata to commitment, or a capability the transaction genuinely needs, which is legitimate and is the basis most often asserted without being written. Any departure is recorded when it is made, with its reason. A departure recorded at the time is a decision. The same one recorded afterwards is an explanation.

Only then is the shape chosen, against what the participants have to hold rather than against the calendar. Where a participant needs a seat, a veto or information an aggregating vehicle cannot pass through, the answer is direct participation and a slower closing. Where they need exposure and nothing else, and the register has to stay short for reasons of its own, the vehicle earns its second constitution. Where neither is true and the timetable is the only argument, the honest name for it is warehousing.

Warehousing survives as an architecture, but only named as one at the outset. Named then, it carries an end date, a stated basis for the price to the eventual participants, a disclosure made when the position is taken rather than when it is placed, and an answer to what the fund does if the syndication fails. Discovered afterwards, it is the same arrangement with none of the four.

What this costs, and where the cost lands

It costs the manager the thing it wanted. A written order admits parties the manager would not have chosen and runs anyway, and it loses the ability to place the balance with the investors it prefers, in the room, at the speed of the transaction. That is not a side effect of the architecture. It is the architecture.

It costs time in the week there is least of it, because an offer to a party who will almost certainly decline still has to be made and recorded as declined. And it costs the vehicle route its governance: aggregation buys a short register and pays in seats, so the participant who wanted a vote holds a unit instead.

A participation placed without a written order is not a favour to the investors who received it. It is a question the manager has agreed to answer later, without the material it would need to answer it.

07 · The implementation framework

Six items in order, and the second one cannot be given to anybody else.

Written as dependency statements rather than tasks, because the sequence is the part that is cheap to get right once and impossible to correct afterwards.

Size the balance. Write the offer order before the names. Answer both perimeters for every place a communication will be received. Choose the shape against what the participants must hold. Write the committee paper to the terms of reference. Then hand each remaining question to the party who signs for it.

The signatures belong elsewhere, as they should. The manager's counsel states what the allocation policy permits, what the conflicts provision requires and from whom, and what each letter already granted. Its regulated advisers answer the arranging and promotion questions separately, in each place an offer will be received. Its tax advisers take the treatment of each shape, since an aggregating vehicle and a direct holding are different transactions with different answers. The advisory committee is not an adviser and does not become one by consenting. Our work is the sizing, the order, the comparison of the three routes, and the paper the committee is entitled to.

The sequence, and what each step depends on

01 The balance, sized from the constitution Depends on the limits being read rather than recalled. Arithmetic, done in a morning, and the only step whose answer is a number. Everything after it decides about a quantity already fixed here.
02 The offer order, written before the names Depends on the manager alone, and no adviser can hold it. The letters already signed set the front of it. The basis behind them is stated, and departures are recorded when made.
03 The two perimeters, answered by place Depends on knowing where each communication will be received, which depends on step 02. Answered before the first page leaves the building, because promotion is engaged by the sending rather than the response.
04 The shape, chosen against what participants hold Depends on all three above and on what each participant needs: a seat, a vote, information, or exposure alone. Chosen against the calendar, it produces the third route by accident.
05 The committee paper, written to the terms of reference Depends on the terms of reference being read as a list rather than a general duty to inform. It goes to the committee at the point the list requires, which is ordinarily before the allocation.
06 The handover to the parties who sign Depends on the five above sitting on one page. Each adviser then receives a question already framed for it, and does not have to reconstruct the transaction first.

Every one of the six is cheap in the order above. Taken in any other, each stops being a control and becomes a disclosure.

What the blueprint carries Where our role stops

08 · What this case generalises to

Wherever something is offered to part of a register, the basis is written before the names or it is not a basis.

Four families of transaction share the shape of this one. In each, something the vehicle owns is offered to some of its holders and not others, and the reason it went where it went exists only in a record somebody decided to make.

Any opportunity larger than the vehicle's own limit

Concentration limits, diversification requirements, borrowing limits, a programme with more capacity than the fund was raised to hold. The limit is a term the holders subscribed on, and what will not fit inside it is a disposal rather than a residual.

Any right granted to one holder that reaches the rest

A co-investment right, a most-favoured-nation clause, an economic break, a seat on the committee. Each is granted to one investor and binds every allocation afterwards, because the clause does not stop at the investor who negotiated it.

Any price the manager both produces and stands across

Warehousing, a transfer between two vehicles of the same house, a continuation, a distribution in specie. The question is never the number. It is whether the number came from a process that can be shown to the people entitled to disagree with it.

Any offer made to part of a register

A class launched into an existing vehicle, a secondary run for some holders, an election on a continuation, a liquidity window opened to a subset. The holders not offered read the report and can count. The response is identical: the order is written first.

The engagement that answers this class is a Structural Options Analysis: the balance sized from the constitution, the offer order written before the names, the three routes drawn to the same depth, and the committee paper. It stops where the signatures start.

The manager arrives asking which of its investors to offer the participation to. The answer it needs is the one thing it can still write down before it knows.

Written as a type · no party, no value and no date · stated as at August 2026

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