What 'guaranteed' should — and shouldn't — mean
An op-ed on the language of certainty in alternative investments, and the discipline of saying what we actually mean.
The word guaranteed appears in our marketing materials. It also appears in our fund offering documents — though it sits, there, inside a set of structural qualifications most readers will never see. The gap between those two usages is worth being honest about.
This is what we mean by it, and what we don't.
What guaranteed means in our flagship vehicles
Our flagship fund offers, for qualifying participants, a preferred return that ranks contractually ahead of manager economics. In plain language: the fund must deliver a baseline rate to investors before the manager — us — earns a single dollar of carry.
The preferred return is real. It is contractual. It is enforceable. It is documented in the limited partnership agreement, audited annually, and verified by an independent administrator.
It is also, importantly, not a guarantee of capital. It is a guarantee of priority. If the fund earns 12%, investors take their preferred return and a defined share of the excess. If the fund earns 4%, investors take what the fund earned, the manager takes nothing, and the preferred return continues to accrue. If the fund earns -2%, investors lose 2%.
The structure protects against one specific failure mode: the manager being paid before the investor sees a return. It does not — cannot — protect against the underlying assets failing.
What guaranteed should not mean
It should not mean that capital cannot be lost. Capital can always be lost.
It should not mean that distributions are scheduled regardless of performance. They are not.
It should not mean that the manager underwrites the investor's principal. We do not, and any manager who tells you otherwise is operating under either a regulatory misunderstanding or a balance sheet they cannot back.
It should not, above all, mean that an investor can stop asking questions.
The language we are trying to hold
We use "guaranteed" because the structural protection in our flagship fund is genuinely unusual and worth naming. We do not use it casually, and we do not use it to imply something the documents do not say.
Our test, internally, is whether a reader of the offering documents would feel that the marketing language was consistent with what they signed. So far, it has been. We intend to keep it that way.
A request to the reader
When you hear the word guaranteed — from us, or from anyone — ask for the documents. Read the priority of distribution. Look for the waterfall. Find the clause that says what happens when the fund underperforms.
A guarantee that survives the first hard question is worth its weight. A guarantee that doesn't, isn't.
We try to write the first kind. We expect our families to test us on it.