Dear Catherine,
Please find attached the initial draft of the Confidential Private Placement Memorandum for Harrowgate Private Equity Fund V LP (the "Fund"), prepared by Calderwood & Harkness LLP in consultation with Graham Sutherland and Stephen Adler, and with input from Sylvia Hartwell on the tax disclosure sections. This draft is being circulated for Harrowgate Capital Partners LLC's internal review and comment prior to distribution to prospective limited partners. As discussed, our target date for distribution of the PPM (together with the limited partnership agreement) to prospective LPs remains June 2, 2025.
**Summary of PPM Coverage**
By way of overview, the draft PPM covers the following principal topics:
- **Description of the Fund:** Harrowgate Private Equity Fund V LP, a Delaware limited partnership, with a target fund size of $2.0 billion (hard cap). - **Investment Strategy:** North American mid-market and upper-mid-market buyouts in industrials, business services, healthcare services, and technology-enabled services, with equity checks of $75 million to $250 million. - **Key Economic Terms:** Management fee of 1.75% on committed capital during the Investment Period, stepping down to 1.50% on invested capital post-Investment Period; carried interest of 20% above an 8% preferred return (compounded annually); European-style whole-fund waterfall with 80/20 GP catch-up; GP commitment of 2.5% of aggregate commitments ($50 million at hard cap). - **Fund Structure:** Main Fund, Parallel Fund (Harrowgate Fund V Parallel LP), Offshore Feeder (Harrowgate Fund V Offshore SLP, Cayman Islands), and blocker entity (HGF V blocker Corp.). - **Track Record:** Performance of predecessor funds (HPE Funds I through IV). - **Biographies** of key investment professionals. - **Risk Factors.** - **Tax Considerations.** - **ERISA Considerations.** - **Regulatory Matters:** Section 3(c)(7) qualification under the Investment Company Act of 1940; Regulation D, Rule 506(b) offering exemption. - **Placement Agent Disclosure:** Osprey Capital Markets LLC. - **Minimum LP Commitment:** $10,000,000 (subject to GP waiver).
**Areas Requiring Client Input / Open Items**
I have flagged the following areas where we need your review and input. These are also marked in the draft with bracketed comments.
1. **Predecessor Fund Performance Data Verification.** The draft includes performance tables for HPE Funds I through IV as of December 31, 2024, as follows:
- Fund I (2012 vintage, $480M): 21.3% Net IRR, 2.1x TVPI, 2.0x DPI — fully realized - Fund II (2015 vintage, $780M): 19.7% Net IRR, 1.9x TVPI, 1.7x DPI — substantially realized - Fund III (2018 vintage, $1.05B): 22.1% Net IRR, 1.8x TVPI, 1.1x DPI — harvesting - Fund IV (2021 vintage, $1.45B): 18.2% Net IRR, 1.4x TVPI, 0.3x DPI — harvesting, approximately 82% deployed
We would ask that Jonathan Birch and the finance team verify all performance figures—including IRR, TVPI, DPI, and deployment percentages—and confirm they are consistent with audited data from Caldwell, Fitch & Hartley LLP. The draft also states total AUM across Funds I–IV of approximately $5.8 billion; please confirm this figure as well. Additionally, please let us know whether any performance figures have been updated since Q4 2024 reporting and, if so, whether you would like the PPM to reflect more current data.
2. **Updated Team Biographies.** The draft includes biographies for Marcus J. Harrowgate (Founder, Managing Partner & CIO), Diana R. Castellano (Partner, Co-Head of Investments), Jonathan P. Birch (Partner, Head of Operations & CFO), Rachel M. Overton (Partner, Head of Investor Relations), and Naveen S. Krishnamurthy (Principal). We would appreciate updated biographies from each professional, and would ask that you coordinate that review internally. Any recent board seats, deal experience, or credential changes should be reflected.
3. **Osprey Capital Markets LLC — Placement Agent Disclosure.** The PPM discloses that Osprey Capital Markets LLC, an SEC-registered broker-dealer and FINRA member, has been engaged as the exclusive placement agent for HPE Fund V, with a placement agent fee of 1.25% of committed capital placed by Osprey, payable by the Sponsor (not the Fund), under a placement agreement effective January 15, 2025. Please confirm the accuracy of the fee description and whether any amendments have been made to the Osprey engagement since execution. The PPM disclosure language was informed by Stephen Adler's placement agent disclosure and compliance memorandum dated April 18, 2025, including pay-to-play compliance considerations under SEC Rule 206(4)-5 and state pension plan placement agent disclosure requirements. We would also ask whether Osprey has provided its own required regulatory disclosure language for inclusion in the PPM.
4. **Risk Factor Review.** The draft includes customary risk factors for a private equity buyout fund, covering market risk, illiquidity, leverage, concentration, reliance on key persons, regulatory changes, tax law changes, and cybersecurity, among others. We would ask that you, Marcus, and the investment team review the risk factors for completeness and accuracy, with particular attention to any fund-specific or strategy-specific risks that should be highlighted. Sylvia Hartwell has included risk factors relating to Section 1061 (the carried interest three-year holding period requirement) and potential changes to the tax treatment of carried interest.
5. **Track Record Presentation.** The current presentation follows industry conventions. We would ask the team to review the methodology disclosures (gross vs. net returns, fee and expense assumptions, and valuation methodology for unrealized investments) and let us know whether you prefer any additional presentation format or supplemental data, such as case studies or attribution analysis. We would note that such supplemental materials are typically provided in a separate data room or DDQ rather than in the PPM itself, but we are happy to discuss the best approach.
6. **Additional Items Flagged.** We have included the following details in the draft and ask that you confirm accuracy and consistency with your internal decisions:
- **HCP SEC Registration:** SEC File No. 801-79223 and CRD No. 298417 are included. Please verify current registration status. - **Investment Period and Fund Term:** Investment Period of 5 years from Final Close; Fund term of 10 years from Final Close with two 1-year GP extensions and one additional 1-year extension with LPAC approval. Please confirm these reflect final internal decisions. - **Organizational Expenses Cap:** $3,500,000, as included in the fee disclosure section. Please confirm. - **Transaction Fee Offset:** 100% of net transaction, monitoring, and break-up fees offset the management fee. Please confirm this is consistent with the terms being reflected in the LPA. (The initial draft of the LPA is being prepared by Stephen Adler on a parallel track, with a target circulation date of May 9, 2025.) - **Early Close discount and Large LP discount:** An Early Close discount of 10 bps and a Large LP discount of an additional 5 bps for commitments of $150M or more are referenced in the terms summary, though the details are primarily addressed in side letters. Please let us know whether you would like further disclosure in the body of the PPM. - **Key Person Provisions:** Marcus J. Harrowgate and Diana R. Castellano are identified as Key Persons. This is reflected in the PPM. - **Concentration Limit:** 20% of aggregate commitments, included in the investment restrictions section. - **Fund-Level Leverage:** Subscription facility borrowings limited to 25% of uncalled commitments; bridge financing limited to 180 days. Included in the investment restrictions section. - **ERISA:** The Fund intends to limit benefit plan investors to less than 25% of each class of equity interests to avoid plan asset treatment. Included in the ERISA section. - **Tax Disclosure:** Covers partnership taxation, UBTI considerations for tax-exempt investors, ECI and FIRPTA withholding for non-U.S. investors, and Cayman tax neutrality of the Offshore Feeder. These sections were drafted by Sylvia Hartwell.
**Next Steps and Timeline**
We would appreciate receiving client comments by approximately **May 16, 2025**, which will allow sufficient time for revisions before the target distribution date of June 2, 2025. I would also like to suggest scheduling a call with you, Rachel, and Jonathan during the week of May 5 to discuss any questions arising from the draft. Graham will lead the call and can address any policy-level questions about the disclosure approach.
As noted above, the LPA initial draft is being prepared by Stephen on a parallel track, with circulation targeted for May 9. The PPM terms summary must be consistent with the final LPA, so the two documents will be cross-checked before distribution. Once your comments on this draft are incorporated, we will circulate a revised draft with a redline against this version.
Please do not hesitate to reach out to me, Graham, or Stephen with any questions in the meantime. We look forward to your feedback.
Best regards,
Theresa Kim Calderwood & Harkness LLP 620 Eighth Avenue, 42nd Floor New York, NY 10018 Direct: (212) 448-6731 Email: tkim@calderwoodharkness.com Matter No. 1003-00002
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*The attached draft Private Placement Memorandum is marked "DRAFT — PRIVILEGED & CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY" and should not be distributed externally at this stage.*