Who's on the Hook

Your investors lost money in someone else's deal. Guess who they're coming after? Not the operator, not the market. You. Your investors gave their capital to you. They trusted your judgment to deploy it wisely. They didn't evaluate the deal. You did. That's the whole point. That's the function you took on when you built a fund of funds. You are not the operator, but you are the selector. You chose which deals to present or put your investors' money into. If one of those deals fails, your investors aren't going to the underlying operator first. They don't have a relationship with that operator. They have a relationship with you. In securities disputes, the middleman gets pointed at first. That's why you can't just trust the operator's pitch deck. You have to actually review the documents, the market assumptions, the capital structure. They're underwriting. The liability isn't with the operator. It's with whoever selected that deal, the person who allocated other people's money to the operator's deal. Most coaches never mention the investment advisor registration question. That's in the long form. See the link in the bio.