The FAR® Program solves several major problems facing Investors in private equity.
How the FAR® Program Works
1
FAR® FUND FORMATION
Your Manager establishes a FAR Fund, which can be a feeder fund or a master fund. This can be a domestic LLC, domestic Series LLC, offshore corporation or offshore segregated portfolio company.
The Fund adopts a FAR Plan that spells out the profit sharing.
You contribute to the Fund. When investments are made, the Fund grants FARs to the Manager which provide the specified profit sharing.
As deals are realized, you can either withdraw or reinvest. The Manager can agree to continue the FARs to incentivize you to reinvest. The Manager’s share of the profits grows pre-tax, tax-deferred until the Manager elects to withdraw them.
2
CONTRIBUTIONS AND GRANTS
With respect to each Contribution and investment in a Deal, the Fund grants such number of FARs that will provide the agreed upon profit sharing. The FARs share in the absolute cumulative profits on the Contribution until the Contribution is redeemed.
3
REINVESTMENTS
The Fund can be designed so that the FARs continue as long as the Investor stays in the Fund. This can be a powerful way to increase returns, as you will gain cumulative profit sharing across all Deals the Manager.
4
EXERCISES
The Manager (or Partner) can exercise a FAR at any time before its Expiration. Upon Expiration the FAR is Exercised automatically. Typically, FARs expire 20 years after the Grant.
The FAR holder may Exercise by paying the Strike Price or by electing to “net settle.” If the FAR holder pays the Strike Price to the Fund, the Fund will issue the Underlying Share to the FAR holder. If the FAR holder elects to net settle, the Fund will issue to the FAR holder such number of Shares that have a fair market value equal to the Spread.