THE EVOLUTION OF THE TRI-PARTY VENTURE FUND®‎

The Early Roman Empire 

Finance during the Roman Empire was different from modern banking. During the Principate, most banking activities were conducted by private wealthy individuals who operated similar to the way large banking firms do today. Anybody that had any available liquid assets and wished to lend it out could easily do so. 

The annual rates of interest on loans varied in the range from 6 to 12 percent, but when the interest rate was higher due to the perception of debtor repayment risk, it typically was either 24 percent or 48 percent. They quoted rates every month, and the most common rates were multiples of twelve. Monthly rates tended to range from simple fractions to 1–4 percent per month, perhaps because lenders used Roman numerals. 

Moneylending during this period was largely a matter of private loans advanced to persons persistently in debt or temporarily so until harvest time. Mostly, it was investments undertaken by exceedingly rich men prepared to take on a high risk if the profit looked good; interest rates were fixed privately and were almost entirely unrestricted by law. Investments were always regarded as a matter of seeking personal profits, often on a large scale. Banking was of the small, back-street variety, run by the urban lower-middle class of petty shopkeepers. 

By the 3rd century, acute currency problems in the Roman Empire drove banking into decline. The rich who were in a position to invest and take advantage of the situation became the only moneylenders when the increasing tax demands in the last declining days of the Roman Empire crippled and eventually destroyed the debtor class by reducing tenant-farmers to serfs. 

Due to the brutal nature by which loan repayments and debtor collateral were collected, even the throngs forcing sons, daughters, and wives to be placed into slavery, in exchange for debt relief, it was eventually considered that usury meant exploitation of the poor. It thereby became considered a sin in certain religious societies with the lenders, merchants and banks became considered evil and to be condemned. 

Later Times 

Originally, usury meant the charging of interest of any kind and, in some Christian societies and even today in many Islamic societies, charging any interest at all was considered usury. Some of the earliest known condemnations of usury come from the Vedic texts of India. Similar condemnations are found in religious texts from Buddhism, Judaism, Christianity, and Islam. At times, many nations from ancient Greece to ancient Rome outlawed loans with any interest. 

Though the Roman Empire eventually re-allowed loans with carefully restricted interest rates, the Catholic Church in medieval Europe banned the charging of interest at any rate (as well as charging a fee for the use of money, such as at a bureau de change). Religious prohibitions on usury are predicated upon the belief that charging interest on a loan is a sin and does harm to the poor without regard to the opportunities it creates.

The 1300s  

In the 1300s, the Venetians became the leaders in the field of investing in debt and the first to start trading debt securities from other governments. They would carry slates with information on the various loans issued for sale and meet with clients, much like a broker does today. 

These money lenders of Europe filled important gaps left by the larger merchants which could be considered banks today. Moneylenders began trading debts between each other; a lender looking to unload a high-risk, high-interest loan might exchange it for a different loan with another lender. These lenders also bought and shared government debt issues. As the natural evolution of their business continued, the lenders began to sell debt issues to customers which could be considered the first individual retail investors. 

The 1500s – The First Stock Exchange — Sans the Stock 

Belgium boasted a stock exchange as far back as 1531, in Antwerp. Brokers and moneylenders would meet there to deal with the business, government and even individual debt issues. It is odd to think of a stock exchange that dealt exclusively in promissory notes and bonds, but in the 1500s there were no real stocks or equity securities. There were many flavors of business-financier partnerships that produced equity growth income as stocks do, but there were no official shares that changed hands. 

The 1600s – Those East India Companies 

In the 1600s, the Dutch, British, and French governments all gave charters to companies with East India in their names. On the cusp of imperialism’s high point, it seems like everyone had a stake in the profits from the East Indies and Asia except the people living there. Sea voyages that brought back goods from the East were extremely risky – on top of Barbary pirates, there were the more common risks of weather and poor navigation. 

To lessen the risk of a lost ship ruining their fortunes, ship owners had long been in the practice of seeking equity investors who would put up money for the voyage – outfitting the ship and crew in return for a percentage of the proceeds if the voyage was successful. These early “limited liability companies” often lasted for only a single voyage. They were then dissolved, and new ones were created for the next voyage. Investors spread their risk by investing in several different venture partners at the same time, thereby playing the odds against all of them ending in disaster. 

When the East India Companies formed, they changed the way business was done. These companies issued stock that would pay dividends on all the proceeds from all the voyages the companies undertook, rather than going voyage by voyage. These were the first modern joint-stock companies. This allowed the companies to demand more for their shares and build larger fleets. The size of the companies, combined with royal charters forbidding competition, meant huge profits for investors. 

Because the shares in the various East India companies were issued on paper, investors could sell the papers to other investors. Unfortunately, there was no stock exchange in existence, so the investor would have to track down a seller or a broker to carry out a trade. 

A Little Stock with Your Coffee? 

In England, most brokers and investors did their business in the various coffee shops around London. Debt issues and shares for sale were written up and posted on the shops’ doors for the first debt and equities market listings.  

Until the Royal Exchange had been founded by English financier Thomas Gresham and Sir Richard Clough on the model of the Antwerp Bourse, as a stock exchange. It was opened by Elizabeth I of England in 1571. 

Brokers were not allowed in the Royal Exchange due to their rude manners. They had to operate from other establishments in the vicinity, notably Jonathan’s Coffee-House. At that coffee house, a broker named John Castaing started listing the prices of a few shipping commodities, such as salt, coal, and paper, and exchange rates in 1698. Originally, this was not a daily list and was only published a few days of the week. 

This list and activity were later moved to Garraway’s coffee house. Public auctions during this period were conducted for the duration that a length of tallow candle could burn; these were known as “by inch of candle” auctions. As stocks grew, with new companies joining to raise capital, the royal court also raised some monies. These are the earliest evidence of organized trading in marketable securities in London. 

Lloyd’s Coffee House also became a significant meeting place in London opened by Edward Lloyd, in 1648 on Tower Street. The establishment was a popular place for sailors, merchants, and shipowners, and eventually the Stockbrokers because of the information they could receive due to Lloyd catering to them by providing reliable shipping news. And because the shipping industry community frequented the place to discuss maritime insurance, shipbroking, and foreign trade. The dealings that took place led to the establishment of the insurance market Lloyd’s of London. Lloyd’s Register was one of the first recognized securities rating services which were created along with several related Lloyd’s shipping and insurance businesses. 

The coffee shop relocated to Lombard Street in December 1691. Lloyd had a pulpit installed in the new premises, from which maritime auction prices and shipping news were announced. Candle auctions were held in the establishment, with lots frequently involving ships and shipping. 

The South Seas Bubble Bursts 

The British East India Company had one of the biggest competitive advantages in financial history — it was a government-backed monopoly. When the investors began to receive huge dividends and sell their shares for fortunes, other investors were hungry for a piece of the action. The budding financial boom in England came so quickly although there were no rules or regulations for the issuing of shares. The South Seas Company (SSC) emerged with a similar charter from the king and its shares, and the numerous new issues, sold as soon as they were listed in Lloyd’s Register. Before the first ship ever left the harbor, the SSC had used its newfound investor fortune to open plush offices in the best parts of London. 

Encouraged by the success of the SSC — and realizing that the company hadn’t done a thing except for issue shares — other “businessmen” rushed in to offer new shares in their own ventures. Some of these were as ludicrous as reclaiming the sunshine from vegetables or, better yet, a company promising investors shares in an undertaking of such vast importance that they couldn’t be revealed. They all sold. Before we pat ourselves on the back for how far we’ve come, remember that blind pools still exist today. 

Inevitably, the bubble burst when the SSC failed to pay any dividends on its meager profits, highlighting the difference between these new share issues and the strong British East India Company. The subsequent crash caused the British government to outlaw the issuing of shares—the ban held until 1825. 

The First Investment Funds (Actively Managed Funds) 

Against this backdrop, a Dutch merchant, Adriaan van Ketwich, had the foresight to pool money from several subscribers to form an investment trust – the world’s first investment fund – in 1774. The financial risk to the mainly small investors was spread by diversifying across many European countries and the American colonies, where investments were backed by income from plantations, an early version of today’s mortgage-backed securities. 

Subscription to the closed-end fund, which Van Ketwich called “Eendragt Maakt Magt” (“unity creates strength”), was available to the public until all 2,000 units were purchased. After that, participation in the fund was available only by buying shares from existing shareholders in the open market. The fund’s Charter (prospectus) required an annual accounting, which investors could view if they requested. Two subsequent funds set up in the Netherlands increased the emphasis on diversification as a means to reduce risk, escalating their appeal to even smaller investors with minimal capital. 

Van Ketwich’s fund survived until 1824 but the Fund vehicle he created is still a hallmark of personal investing more than two centuries later with an estimated $27.86 trillion in global assets. The early investment funds that spread were of the closed-end variety, issuing a fixed number of shares. They spread from the Netherlands to England and France before heading to the U.S. in the 1890s, where they were traded as mutual funds on the London Stock Exchange and the newly created exchanges in the United States. 

The NYSE 

Whereas the London Stock Exchange (LSE) was handcuffed by the law restricting shares, the New York Stock Exchange dealt in the trading of stocks, for better or worse, since its inception. The NYSE wasn’t the first stock exchange in the U.S. however. That honor goes to the Philadelphia Stock Exchange, but the NYSE quickly became the most powerful. 

Formed by brokers under the spreading boughs of a buttonwood tree, the New York Stock Exchange made its home on Wall Street. The exchange’s location, more than anything else, led to the dominance that the NYSE quickly attained. It was in the heart of all the business and trade coming to and going from the United States, as well as the domestic base for most banks and large corporations. By setting listing requirements and demanding fees, the New York Stock Exchange quickly became a very wealthy institution. 

The NYSE faced very little serious domestic competition for the next two centuries. Its international prestige rose in tandem with the burgeoning American economy, and it was soon the most important stock exchange in the world. The NYSE had its share of ups and downs during the same period. Everything from the Great Depression to the Wall Street bombing of 1920 left scars on the exchange — the 1920 bombing, believed to have been carried out by anarchists, left 38 dead and also literally scarred many of Wall Street’s prominent buildings. The less literal scars on the exchange came in the form of stricter listing and reporting requirements by the Securities and Exchange Commission (SEC). 

On the international scene, London re-emerged as the major exchange for Europe, but many companies that were able to list internationally still listed in New York. Many other countries including Germany, France, the Netherlands, Switzerland, South Africa, Hong Kong, Japan, Australia, and Canada developed their own stock exchanges, but these were largely seen as proving grounds for domestic companies to inhabit until they were ready to make the leap to the LSE and from there to the big leagues of the NYSE. Some of these international exchanges are still seen as a dangerous territory because of weak listing rules and less rigid government regulation. 

Despite the existence of stock exchanges in Chicago, Los Angeles, Philadelphia, and other major centers, the NYSE was the most powerful stock exchange domestically and internationally. In 1971, however, an upstart emerged to challenge the NYSE hegemony. 

The New Kid on the Block 

The Nasdaq was the brainchild of the National Association of Securities Dealers (NASD) — now called the Financial Industry Regulatory Authority (FINRA). From its inception, it has been a different type of stock exchange. It does not inhabit a physical space, as with 11 Wall Street. Instead, it is a network of computers that execute trades electronically. 

The introduction of an electronic exchange made trades more efficient and reduced the bid-ask spread — a spread the NYSE wasn’t above profiting from. The competition from Nasdaq has forced the NYSE to evolve, both by listing itself and by merging with Euronext to form the first trans-Atlantic exchange. 

The Future: World Exchange Parity? 

The NYSE is still the largest and, arguably, the most powerful stock exchange in the world. The Nasdaq has more companies listed, but the NYSE has a market capitalization that is larger than Tokyo, London and the Nasdaq exchanges combined — and the merger with Euronext makes it larger still. The NYSE, once closely tied to the fortunes or failures of the American economy, is now global. Although the other stock exchanges in the world have grown stronger through mergers and the development of their domestic economies, it is difficult to see how any of them will dislodge the 800-pound gorilla that is the NYSE any time soon. 

The Private Hedge Fund Market (Privately Managed)

Alfred Winslow Jones

Born in Melbourne, Australia, in 1901, a former writer and sociologist Alfred Winslow Jones’s company, A.W. Jones & Co. launched the first hedge fund in 1949 and is known as the godfather of the U.S. hedge fund industry as we know it today.  It was while writing an article about current investment trends for Fortune in 1948 that Jones was inspired to try his hand at managing money. He raised $100,000 (including $40,000 out of his own pocket) and set forth to try to minimize the risk of holding long-term publicly-traded stock positions by short selling other stocks. Alfred Winslow Jones sublet an office near Wall Street for A.W. Jones Partners, the name of his hedge fund. 

Jones was light-years ahead of both Wall Street practitioners and the academic community. A.W. Jones Partners differed from its public predecessors because the fund could deploy multiple strategies and go both long and short the market, which is an investing innovation is now referred to as the classic long/short equities model. Jones also employed leverage to enhance returns. What’s more, Jones invented the now-standard 2-and-20 hedge fund fee model. Several other key differences separated the A.W. Jones Partners’ funds from its peers active at the time. For example, despite the Securities and Exchange Act of 1933, Jones’ partnership was never registered to be traded on an exchange, nor advertised. When more than 99 partners had signed up, Jones set up a new parallel partnership in 1961. However, potential partners were screened and qualified for suitability as investors. A.W. Jones Partners’ staff were paid through a position in the investing pool, so their money was taxed as capital gains rather than salary.

During the first 20 years of operation, the A.W Jones Partnership returned just under 5000%. An investment of $10,000 in 1949 was worth $480,000 twenty years later. Jones’s investors lost money in only 3 of his 34 years. 

A.W. Jones Partners Today 

The next significant milestone in the A.W. Jones Partnership history occurred in 1983 when Jones’ son-in-law, Robert L. Burch, III became a General Partner. The following year he became Managing Partner and fully transformed the firm into a formalized fund-of-funds structure with no internal managers. This transformation was not a sudden break, but rather the result of the fund’s evolution toward a diversified, multi-manager portfolio. As Burch was making his initial allocations to external managers, he wisely made the largest allocation to a new hedge fund run by his old friend Julian Robertson. Tiger Management would go on to become one of the largest and most successful hedge funds in the world. During the 1980s, Alfred Winslow Jones continued to be available for advice and counsel to the firm until his death in 1989 at age 88. 

Today the family tradition continues at A.W. Jones. Jones’ grandson, Robert L. Burch, IV, became a General Partner in 2003 and manages the firm with his father. A.W. Jones Company continues to invest its partners’ capital in the equity funds industry. Remarkably, the operation that started in 1949 with $100,000 in actively managed capital has now spawned an investment sector with thousands of funds managing over $3.6 trillion. 

The Legacy A.W. Jones Created 

There is nothing that definitively marks actively managed hedge fund managers apart from other passively managed investments. Instead, all actively managed asset management firms sit on a spectrum, whether in terms of fees charged, strategies employed, or the types of vehicles offered to investors. The idea that actively managed hedge funds represents a clear, separate grouping has never been more obvious. Depending on the definition of an actively managed hedge fund, the assets managed are estimated at around $3.6tn. Finding a meaningful number is not only a definitional exercise but also a statistical one, subject to uncertainty. Flows into or out of what others define as a private non-reporting industry should, therefore, be viewed in the context of such error, which should be calculated and reported. 

How many assets are under the management of the hedge fund industry? This is a straightforward-sounding question, and it is common to see a straightforward-looking answer: $3.6tn according to the Securities and Exchange Commission (SEC), or $3.6tn according to Hedge Fund Research Inc. (HFR), a data provider. This masks the fact, however, that there is no unambiguous boundary between what could be considered a “hedge fund” and an active fund manager, with no distinct “hedge fund industry” existing. Those attempting to define hedge funds usually do so by referring to a collection of characteristics. Comments submitted for an SEC “Roundtable on Hedge Funds” in May 2003 set out a range of definitions, highlighting the ambiguity around the term but “active” versus “passive” fund management is a critical new term and one for huge philosophical debate and financial implications. 

The ETF is Invented (Passively Managed Funds) 

ETFs had their genesis in 1989 with Index Participation Shares, an S&P 500 proxy that traded on the American Stock Exchange and the Philadelphia Stock Exchange. This product, however, was short-lived after a lawsuit by the Chicago Mercantile Exchange and was successful in temporarily stopping sales in the United States. A similar product, Toronto Index Participation Shares, started trading on the Toronto Stock Exchange (TSE) in 1990. The shares, which tracked the TSE 35 and later the TSE 100 indices, proved to be popular. The popularity of these products led the American Stock Exchange to develop something that would satisfy SEC regulation in the United States. 

ETF’s Invented in 1993

Nathan Most and Steven Bloom, under the direction of Ivers Riley, designed and developed Standard & Poor’s Depositary Receipts (NYSE Arca: SPY), which were introduced in January 1993. Known as SPDRs or “Spiders”, the fund became the largest ETF in the world. In May 1995 they introduced the MidCap SPDRs (NYSE Arca: MDY). 

Barclays Global Investors, a subsidiary of Barclays PLC, in conjunction with MSCI, as its underwriter, a Boston-based third-party distributor, Funds Distributor Inc., entered the market in 1996 with World Equity Benchmark Shares (WEBS), which later became iShares MSCI Index Fund Shares. WEBS tracked MSCI country indices, originally 17, of the funds’ index provider, Morgan Stanley. WEBS was particularly innovative because it gave casual investors easy access to foreign markets. While SPDRs were organized as unit investment trusts, WEBS were set up as a mutual fund, the first of their kind. 

In 1998, State Street Global Advisors introduced “Sector Spiders”, which follow nine sectors of the S&P 500. Also, in 1998, the “Dow Diamonds” (NYSE Arca: DIA) were introduced, tracking the famous Dow Jones Industrial Average. In 1999, the influential “cubes” (NASDAQ: QQQ), were launched attempting to replicate the movement of the NASDAQ-100. 

In 2000, Barclays Global Investors put a significant effort behind the ETF marketplace, with a strong emphasis on education and distribution to reach long-term investors. The iShares line was launched in early 2000. Within five years iShares had surpassed the assets of any other ETF competitor in the U.S. and Europe. Barclays Global Investors was sold to BlackRock in 2009. 

The Vanguard Group entered the market in 2001. The first fund was Vanguard Total Stock Market ETF (NYSE Arca: VTI), which has become quite popular, and they made the Vanguard Extended Market Index ETF (NYSE Arca: VXF). Some of Vanguard’s ETFs are a share class of an existing mutual fund.  iShares made the first bond funds in July 2002, based on US Treasury bonds and corporate bonds, such as iShares iBoxx $ Invest Grade Crp Bond (NYSE Arca: LQD). They also created a TIPS fund. In 2007, they introduced funds based on junk and muni bonds; about the same time State Street and Vanguard created several of their own bond ETFs. 

Since then ETFs have proliferated, tailored to an increasingly specific array of regions, sectors, commodities, bonds, futures, and other asset classes. As of January 2014, there were over 1,500 ETFs traded in the U.S., with over $1.7 trillion in assets.  By May 2019, U.S. ETF assets went above $3.4 trillion. 

Actively vs. passively Managed Funds 

If you’ve ever wondered what the difference is between an active or passive investment fund, or managed hedge fund understand that they’re not the same, and one may fit your investing situation better than the other. 

An actively managed investment fund is a fund in which a manager or a management team makes decisions about how to invest the fund’s money. A passively managed fund, by contrast, simply follows a market index or is an ETF (​exchange-traded fund). ETFs generally do not have a management team making investment decisions. You’ll often hear the term “actively managed fund” concerning both mutual funds and hedge funds, although there are also anomalies for actively managed ETFs. 

The Pros and Cons of Each 

The finance community likes to debate about whether actively managed or passively managed funds are superior and the risk inherent for each. Supporters of actively managed funds point to the following positive attributes: 

  • Actively managed funds make it possible to beat the market index. 
  • Several funds, like Fidelity’s Magellan Fund under the guidance of Peter Lynch, posted huge returns. The Magellan Fund averaged a 29% return from 1977 to 1990. 
  • Even the A.W. Jones the Godfather of the Hedge Fund Industry, and his company beat and continues to beat any comparable index from its inception. 
  • Returns to Investors for Active funds must be quoted net of Fees and Expenses charged so investor return perceptions are less than realized investment results. 

On the other hand, actively managed funds have several downsides: 

  • Statistically speaking, while there are some standout Fund Managers, most actively managed funds tend to “underperform,” or do worse than, the top market indexes. 
  • The Magellan Fund and A.W. Jones partners (the examples cited above) are notable because of their exceptions, not the norm, and few people could have guessed that they would have done so well when they began. We only know how well they did with the benefit of hindsight. 
  • Every time an active fund sells a holding, the investors of the funds incur taxes and fees, which diminishes the fund’s performance. 
  • You’ll pay a flat fee regardless of whether your fund does well or does poorly. If the ETF offers a 7% return without management fee, and the active fund makes a 9% return but charges a 2% management fee, you’ve made the same return, but 9% is more difficult to sustain. 

Active versus passive investing strategies have often been framed as an all or nothing proposition, but this needn’t be the case. Combining active and passive management should be the best way to construct a portfolio, focusing on active strategies in areas where they are most likely to succeed.  Weak retail wealth managers and investment advisors who have a set it and forget it mentality with regards to asset allocations in ETF may be creating a disaster in our horizon.   

Is there a risk of a bubble in the ETFs? 

Due to the fact that so much money over the last several years has been moving into these passive indexed investments, which estimates now approximate being equal weighting to actively managed hedge funds, and much is moving from the publicly traded mutual funds, there could be a looming bubble in the marketplace, pegged to the major indexes ETFs are fixed to. 

While actively managed Hedge Funds and Mutual Funds have always sought the highest and best return on their investment, by analyzing and hand-selecting the best of breed debt and equity investment securities. And, whilst the passive ETFs merely seek a weighted investment across an index, which may not only be the same best of breed securities but also mid-range and laggard securities, that live within the particular index they mirror.  We may then find a transfer of large amounts of wealth, moving from the very best companies’ stock and bond securities, shifting to the cross-sections of the indexed securities.  This will naturally reset the demand curve for what the actively managed funds might consider the best of breed stocks and bonds, but also amplify demand for the less than stellar securities.  This increased value of the worst stock and bonds within the index the ETF is fixed to, creates an inverse valuation imbalance.  Each dollar movement from actively managed Mutual Fund or Hedge Fund to Passively Managed ETFs, also represents a two-dollar swing between asset classes.

Whenever there has been atypical individual stock or bond trading throughout history, conducted without regards to the intrinsic value or merits of either the debtor’s transaction matrix’s and its ability to pay… and/or the underlying company’s (or venture partner’s) appraisal and asset holder’s accepted valuation, regardless of the investors appraisal methods at the time, there has been an artificial inflating of the asset value, thereby producing a “bubble” that market forces have in every instance corrected. 

CAPQ’s Invention of Tri-Party Venture Funds®‎ A Return to Quality Venture Partners 

There is no doubt that businesses throughout the world will always require investment capital. Even the oldest and healthiest companies require cash to manage its day to day business.  For the best companies, the debt and equity capital they require is an “ebb and flow” or a recurrent or rhythmical pattern of capital coming and going based on growth requirements and its ability to take on debt and equity investments. This capital movement into a company is managed constantly and on an ongoing basis.  The healthiest companies continuously require capital in the form of loans or debt from moneylenders, as well as equity investments from partners, shareholders, and limited partners, who successfully assist the company in increasing value and not over-burdening their organizations with debt or with repayment covenants which if left unchecked could do harm to their organization, and risk its financial health and stability.  

At all places throughout history and in all of its forms, there was no substitute for quality Venture Partners to invest in, for both debt and equity. Whether it is the best farmer in the Roman Empire, the best ships’ captains traversing the high seas to India or the best private or public company traded on any exchange, the Company or Venture Partner has always been the key to successful investing. 

Uncovering the Venture Partners or least risky companies to back, while difficult, in reality, it is the most critical component to investment performance and the only debt and equity securities that eventually provide a “return of” and “return on” investment. 

A Tri-Party Venture Fund®‎ attempts to distinguish the very best Venture Partners, or companies whose past performance, has demonstrated verifiable, historical, consistent, sustainable and replicable business models that have the potential to provide above-market, risk-adjusted returns to the investors, admitted as Limited Partners to the Fund. Once these exceptional Venture Partners are discovered the General Partner of the Fund builds an embedded analytical team around the Venture Partner, to help create a knowledge base to use the Venture Partner’s key developments and fundamental trending data to better monitor the Funds risk profile. This is in substitution for some contrived safety in a made-up diversification premise, which was only created to help potentially spread risk or investment losses over a broad bucket of debt and equity securities in a marketplace.

As the name indicates the Tri-Parties, are the Venture Partner, the General Partner and the Limited Partners, each having critical roles. The Venture Partner is, as discussed, the pre-qualified investment, with debt and equity investment needs. The General Partner is the Fund Manager who while maintaining a mutually exclusive financial relationship, actively manages the investments of its single Venture Partner, making adjustments and taking corrective measures, as needed to provide the funding the Company requires. The Capital Partner assigns a team of analysts, who are specialists not generalists, in the monitoring of the Venture Partner’s expected investment results and expands or retracts the fund’s operations based on the Venture Partner’s performance.  The Limited Partners are the investors, providing the capital that may be required and through the fund, performance would realize risk-adjusted returns based on the Venture Partner and General Partner’s cooperation and the underlying performance of the investments.

With this in mind, Tri-Party Venture Funds®‎ were invented to bridge the actively managed and passively managed gap, creating a new Hedge Fund construct, with the fund maintaining “mutually exclusive agreements” with pre-qualified and what CAPQ deems extraordinary “Venture Partners”, to provide all (or a significant percentage of all) debt and equity investments. and as appropriate create “bank-lending type” restrictive and protective covenants on the Venture Partner.

This potentially replaces the need for other senior secured debt and equity investments altogether with the Venture Partner from outside banks, financial institutions, individual investors and other funding sources.  This creates a financial safety net for the Venture Partner uncommon in the financial ecosphere but with the Tri-Party Venture Fund®‎ existing only to fund the Company, the Venture Partner understands they must provide a market-adjusted return or they may risk investor redemptions similar to all hedge funds, which would ultimately cause their Tri-Party Venture Fund®‎ to cease to exist as a beneficial cohort for the Venture Partner, the Limited Partners and the General Partner. 

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