What Private Fund Managers Should Review Before Closing the Books for 2026: 5 Things to Consider When Preparing For 2027

December tends to pull private fund managers in several competing directions whether it be portfolio companies needing attention, investors wanting year end reporting, valuations needing to be finalized, auditors beginning their work, and the management company considering about what comes next. These competing interests make the year end a particularly useful time to ask a broader question: Does the fund and management company you are taking into 2027 still operate the way your governing documents, disclosures, investor agreements, and compliance program say they do?

For a newer manager, the answer may be straightforward. However, for a manager that raised another fund, added employees, offered co-investment opportunities, negotiated new side letters, or simply grew during 2026, the answer deserves a closer look. Here’s what to think about:

1. Start With Changes During the Year

A good end of year review should begin with the business. While each development for the business may be positive, collectively, they may change the fund manager’s regulatory and operational profile. For example, for an exempt reporting adviser, growth is a reason to revisit the basis for the exemption under the Advisers Act. Managers relying on the private fund adviser exemption often focus on its $150 million threshold, but assets under management is only part of the analysis. That exemption generally requires the adviser to advise solely private funds and activities such as adding separately managed accounts can require the manager to reconsider its status before assets approach $150 million.

The end of the year is also the right time to look forward. If Fund II is expected to close substantial additional commitments during 2027, or a new strategy is already being developed, the manager should understand what those plans mean for its regulatory status now. Furthermore, regulatory requirements may be approaching their annual deadlines. Form ADV annual reporting amendments are generally due within 90 days after December 31^st and Form D annual amendments are due on the first anniversary of the most recent previously filed notice if the offering is still continuing.

2. Carefully Analyze the Basis for End of Year Reporting

Valuations and end of year reporting deserve more attention than simply confirming that a policy exists in a manual. For many private funds, end of year is when valuation judgements receive the most scrutiny from auditors, investors, or both and it is imperative that fund managers have a basis for how valuations and performance metrics were reached. Documentation is crucial here. The SEC’s examination priorities and SEC staff continue to identify valuation among the core areas considered when assessing adviser compliance programs. This is especially important when considering that today’s end of year valuation may become tomorrow’s track record which has a direct impact on the marketability of Fund II.

3. Follow the Money Back Through the Documents

Fees and expenses are another area where small practices can develop gradually into a large problem. As examples, abandoned transactions may have involved more than one vehicle, a portfolio company fee may trigger an offset under the operating agreement, or organizational expenses may be approaching a contractual cap. As an exercise to mitigate these issues, fund managers should take actual expenses from 2026 and follow them backward through the disclosures to evaluate whether the allocation methodology matches what investors were told, ensure that expenses charged were appropriate, and ensure allocations are supportable and consistently applied. This review can be particularly valuable when preparing to launch future funds as fund managers will have the opportunity to identify whether certain provisions or practices created ambiguity or presented difficulties in application.

4. Revisit What Investors Were Promised

The company agreement and PPM are only a portion of the contractual picture. By December, a manager may also have a collection of side letters, advisory committee arrangements, co-investment understandings and investor reports which may be difficult to administer as a group. Evaluating what investors were promised helps ensure fund managers comply with their disclosure requirements and meet investor expectations. Additionally, communicating how the fund is actually performing, even if performance is below original projections, can help mitigate future investor issues.

5. Know What Q1 Requires and Enter 2027 with the Business and Documents Aligned

Once the substantive review is complete, build the calendar including Form ADV and Form D deadlines, investor deadlines, K-1 deadlines, and other matters requiring timeliness. Managers should coordinate audit, tax, investor reporting, advisory committee, and other contractual deadlines rather than assuming the fund administrator or some other service provider is tracking the entire picture.

Importantly, private funds rarely become misaligned with their documents because of one decision as misalignment is usually a result of the business evolving over time. For small and middle market managers, that review does not need to become an expensive compliance exercise disconnected from the business. Fund counsel, accountants, administrators, and compliance professionals can each play a role in that process. The most useful conversations tend to happen before a filing deadline or investor request forces the issue.

Closing the books on 2026 should leave private fund managers with more than finalized numbers and should instead allow the fund to enter 2027 with operations, investor promises, regulatory status, and governing documents all supporting each other. If your year end review raises questions about whether your fund documents, regulatory status, or compliance practices still fit the business you are taking into 2027, our Corporate and Securities team can help. We work with private fund managers at each stage of growth to identify issues early, address changes as the business evolves, and prepare for what come next. Contact our team to discuss your fund’s year end considerations and plans for 2027.