The Securities and Exchange Commission (SEC) has expanded its focus on private equity funds to ancillary asset classes, including specifically private equity real estate funds, with its Private Funds Unit (“PFU”) undertaking a thematic review of the real estate fund industry. In a recent speech1, Mr. Marc Wyatt, Acting Director of the Office of Compliance Inspections and Examinations, addressed the areas of concern and focus for the SEC in the private equity arena2. In particular, practices concerning fees, expense allocations, valuation and co-investment allocation have all been—and still represent—the areas of most concern for the SEC. In his speech, Mr. Wyatt pointed out that it is incumbent upon managers to “fully and fairly describe “the deal” to investors, including discussing in a meaningful way how expenses will be assessed and fees will be collected”.

Areas real estate fund managers should take note of include...