Defining Today’s Opportunities Funds


This post is by Michael Gorman from Top Tier Capital Partners Blog


Defining Today’s Opportunities Funds

Top Tier has observed a growing number of funds titled as “Opportunities” Funds in the ecosystem, which can mean many different things. We are continually having to define these fund names internally so we have accurate context, and thought it would be helpful to share our naming conventions which are based on the underlying investment strategy. While many have come to think of these funds as “Growth” stage vehicles, the nuances are important to note when defining these side pools of capital that are available in the ecosystem. GPs with demonstrated access to high-quality deals have long been raising more and more capital in these sidecar pools, which are often referred to as Opportunities Funds. Admittedly, Top Tier has fallen into the Opps Fund naming convention and we’re happy to unpack why we have one too!

First, let’s define the overarching principles of an Opps Fund:

  • Generally, a different, but related strategy from the Core Funds that a firm raises:
  • i.e., an early-stage fund will raise a later-stage focused Opps Fund and a later-stage firm might raise an early-stage fund (or, more likely, an even later-stage focused fund).
  • This is important as there are typically limitations on raising subsequent investment vehicles without existing LP approval, if the strategy is the same. While GPs typically obtain approval from the LPAC’s for this fund (and often times, they invest), it’s not always necessary, depending on the fund strategy and structure of the LPA.
  • Initially marketed as an unproven strategy for the firm, (Read more…)