Meaning and transaction use
An SEC-filed prospectus defines direct investments as private equity or debt investments in selected operating companies, often alongside a fund manager, and states that the adviser conducts its own diligence. [S1]
Another SEC filing describes direct-investment diligence including management meetings, site visits, industry discussions and review of financial results and projections. [S2]
Proposed control method: use a deal-level underwriting file, rights matrix, monitoring plan and independent valuation process.
Worked example
Illustrative direct equity investment only. Assume 5.0 million invested, 1.0 million of cumulative distributions and a current fair value of 7.0 million.
Scroll the table horizontally to view all columns.
| Measure | Calculation | Result |
|---|---|---|
| Total value | 1.0 + 7.0 | 8.0m |
| Invested capital | Given | 5.0m |
| Gross value multiple | 8.0 / 5.0 | 1.60x |
| Unrealised share of total value | 7.0 / 8.0 | 87.5% |
The illustrative gross value multiple is 1.60x, with 87.5% of total value remaining unrealised.
Proposed transaction review process
Source and screen
Test mandate fit, access, conflicts and portfolio capacity.
Underwrite
Review market, management, financials, valuation, structure and downside.
Execute
Negotiate rights, approvals, funding and closing controls.
Monitor and exit
Track thesis, governance, valuation, follow-ons and liquidity routes.
Evidence checklist
Commercial
Market, customers, competition, product and management.
Financial
Historical results, forecasts, cash, debt and scenarios.
Legal and tax
Ownership, contracts, compliance, structure and liabilities.
Governance
Information, consent, board, transfer and exit rights.
Decision framework
| Situation | Proposed action |
|---|---|
| Diligence access is limited | Reduce exposure, add protection or decline. |
| The investment raises concentration | Test policy capacity and downside liquidity. |
| A follow-on is requested | Re-underwrite value, need, terms and alternatives. |
| The exit is delayed | Refresh valuation, governance and liquidity scenarios. |
Common errors to check
- Relying only on sponsor diligence.
- Ignoring governance and information rights.
- Underestimating follow-on needs.
- Using stale valuations for portfolio decisions.
Build the direct-investment case
Bring the opportunity, diligence, structure and portfolio exposures to a direct-investment review. Reconcile return, downside and governance.
Discuss the transactionPrimary references and editorial scope
- SEC filing: Direct-investment definition and diligence
Definition of direct private equity or debt investments and requirement for adviser diligence. Reference checked 17 September 2026. - SEC filing: Direct-investment diligence process
Example intensive direct-investment diligence using management, site, industry and financial review. Reference checked 17 September 2026.
General transaction education using public United States filings. Figures are hypothetical. Investment documents, valuation policy, regulation, tax and legal advice govern actual outcomes.
General business information. Obtain advice appropriate to the legal, tax, accounting and financing facts. No offer, lender commitment or transaction outcome is represented. All worked examples use expressly assumed figures. Editorial draft date: 17 September 2026.
