Method and system for adding liquidity to alternative investment transactions

Abstract

The invention provides a method and system for providing liquidity to an alternative investment fund. The transaction system includes a plurality of fund investors; an alternative investment fund in which the fund investors commit to the investment of “alternative investment funds,” the alternative investment fund managed by a fund manager; a structure operated in conjunction with the alternative investment fund, the structure managed by a structure manager; and a plurality of structure investors, the structure investors investing structure funds into the structure. The structure provides at least one fund investor with an option to designate cash distributions of the alternative investment fund, which are made available to the at least one fund investor, to the structure. In the system the at least one fund investor obtains a liquidation of alternative investment funds upon the designation of the cash distributions of the alternative investment fund.

What is claimed is: 
     
         1 . A computer-implemented method for providing liquidity to an AI fund through the use of a liquidation trust, the liquidation trust managed by a structure general partner and the AI fund managed by a fund general partner, wherein the AI fund comprises equity interest in investments selected from a group consisting of private equity funds, hedge funds, leveraged buyout funds, venture capital funds, partnerships, real estate investment trusts, real estate properties, and private company stocks, the method comprising:
 receiving, from an AI fund investor, an assignment of a designated investment in the AI fund to the liquidation trust, and conveying the assignment from the fund general partner to the structure general partner, wherein the fund general partner and the structure general partner are distinct;   establishing at least two classes of trust equity interests based on the assignment, the two classes of trust equity interests providing distributions based on returns on the designated investment and including a senior equity interest and a junior equity interest;   determining the senior equity interest by calculating (1) a preferred amount equity component to be paid in priority to the junior equity interest and (2) a first portion of a non-preferred equity component that is paid after satisfaction of the preferred amount;   calculating the junior equity interest comprising a second portion of the non-preferred equity component that is paid after satisfaction of the preferred amount, wherein the senior equity interest and junior interest thereby share in the non-preferred equity component return;   transferring title of the senior equity interest to the liquidation trust;   assigning the junior equity interest to the AI fund investor; and   assigning the senior equity interest to a trust participant other than the AI fund investor, thereby providing for the AI fund investor to obtain a liquidation of the designated investment while continuing to share in a potential up-side return based on the junior equity interest.   
     
     
         2 . The computer-implemented system of  claim 1 , wherein the senior equity interest includes the preferred amount and a portion of a residual component of capital return following satisfaction of the preferred amount. 
     
     
         3 . The computer-implemented method of  claim 1 , wherein the preferred amount corresponds to no greater than 30% of a fair market value of the designated investment, thereby providing for the senior equity interest holder to receive returns from the designated investment in the AI Fund up to that preferred amount before returns are paid to the junior equity interest holder. 
     
     
         4 . The computer-implemented method of  claim 1 , wherein the preferred amount is 30% or less of a fair-market value of the designated investment, thereby providing a senior equity interest that has the characteristics of an investment grade debt. 
     
     
         5 . The computer-implemented method of  claim 1 , wherein the AI fund investor receives funds corresponding to no greater than 30% of the fair-market value of the designated investment in the AI fund, thereby providing the AI fund investor no greater than 30% liquidity while maintaining a longer-term upside interest in the performance of the AI fund through the junior equity interest held by the AI fund investor. 
     
     
         6 . The computer-implemented method of  claim 1 , wherein the non-preferred equity component is paid out to the trust equity interests in subordinate priority to the preferred amount, the senior equity interest receiving a first portion comprising 10% of the non-preferred equity component and the junior interest receiving a second portion comprising 90% of the non-preferred equity component, thereby providing for the holder of the junior equity interest and the holder of the senior equity interest to share in the long-term upside of the designated investment. 
     
     
         7 . The computer-implemented method of  claim 1 , wherein the liquidation trust establishes a plurality of equity trust interests comprising a senior interest and a plurality of junior interests, the junior interests being subordinate in priority to the senior interest, each of the junior interests having established return components that define the priorities as between said junior interests. 
     
     
         8 . The computer-implemented method of  claim 1 , wherein the liquidation trust establishes a plurality of equity tranches corresponding to the senior equity interest and a plurality of junior equity interests. 
     
     
         9 . The computer-implemented method of  claim 8 , wherein the non-preferred equity component is shared among the senior equity interest and multiple junior equity interests. 
     
     
         10 . The computer-implemented method of  claim 1 , wherein the entity that receives the senior equity interest is an individual buyer. 
     
     
         11 . The computer-implemented method of  claim 1 , wherein the entity that receives the senior equity interest is a second fund. 
     
     
         12 . The computer-implemented method of  claim 11 , wherein the second fund pools the senior equity interest with senior equity interests from other alternative investment funds or from other AI fund investors. 
     
     
         13 . The computer-implemented method of  claim 1 , wherein the entity that receives the senior equity interest is a second trust. 
     
     
         14 . The computer-implemented method of  claim 1 , wherein the AI fund investor's interest is an ownership interest in the AI fund. 
     
     
         15 . The computer-implemented method of  claim 1 , wherein the AI fund investor's interest is a right to distributions from the investor's ownership interest in the AI fund. 
     
     
         16 . The computer-implemented method of  claim 1 , wherein the compositions and respective priorities of the senior equity interest and the junior equity interest are negotiated between the AI fund investor and a buyer receiving the senior equity interest. 
     
     
         17 . The computer-implemented method of  claim 1 , wherein a plurality of AI fund investors designate portions of their respective interests in the AI fund for liquidation, the designations resulting in issued classes of trust equity interests that differ between at least some of the plurality of AI fund investors. 
     
     
         18 . The computer-implemented method of  claim 17 , wherein the plurality of AI fund investors can select the portion of their respective interests to be liquidated, such that some investors liquidate different-sized interests than others. 
     
     
         19 . The computer-implemented method of  claim 1 , wherein the senior equity interest has priority with regard to the junior equity interest, but is subordinate in priority to another senior equity interest. 
     
     
         20 . The computer-implemented method of  claim 1 , wherein the senior equity interest has a first portion of a non-preferred equity component, the junior interest has a second portion of the non-preferred equity component, and there is at least one additional trust equity interest subordinate to the senior equity interest that receives a third portion of the non-preferred equity component. 
     
     
         21 . The computer-implemented method of  claim 1 , wherein the AI fund investor repurchases or buys back all or a portion of the senior equity interest. 
     
     
         22 . The computer-implemented method of  claim 1 , wherein the AI fund investor sells all or a portion of the junior equity interest to a third party. 
     
     
         23 . A non-transitory computer readable medium comprising program instructions for providing liquidity to an AI fund through the use of a liquidation trust, the liquidation trust managed by a structure general partner and the AI fund managed by a fund general partner, wherein the AI fund comprises equity interest in investments selected from a group consisting of private equity funds, hedge funds, leveraged buyout funds, venture capital funds, partnerships, real estate investment trusts, real estate properties, and private company stocks, the program instructions comprising code for causing at least one computer processor to perform the following:
 receiving, from an AI fund investor, an assignment of a designated investment in the AI fund to the liquidation trust, and conveying the assignment from the fund general partner to the structure general partner, wherein the fund general partner and the structure general partner are distinct;   establishing at least two classes of trust equity interests based on the assignment, the two classes of trust equity interests providing distributions based on returns on the designated investment and including a senior equity interest and a junior equity interest;   determining the senior equity interest by calculating (1) a preferred amount equity component to be paid in priority to the junior equity interest and (2) a first portion of a non-preferred equity component that is paid after satisfaction of the preferred amount;   calculating the junior equity interest comprising a second portion of the non-preferred equity component that is paid after satisfaction of the preferred amount, wherein the senior equity interest and junior interest thereby share in the non-preferred equity component return;   transferring title of the senior equity interest to the liquidation trust;   assigning the junior equity interest to the AI fund investor; and   assigning the senior equity interest to a trust participant other than the AI fund investor, thereby providing for the AI fund investor to obtain a liquidation of the designated investment while continuing to share in a potential up-side return based on the junior equity interest.   
     
     
         24 . A computer-implemented method for obtaining liquidity to an AI fund through the use of a liquidation trust, wherein the AI fund comprises equity interest in investments selected from a group consisting of private equity funds, hedge funds, leveraged buyout funds, venture capital funds, partnerships, real estate investment trusts, real estate properties, and private company stocks, the method comprising:
 designating, by at least one processor, an investor's investment in the AI fund for assignment to the liquidation trust;   agreeing to an establishment of at least two classes of trust equity interests based on the assignment, the two classes of trust equity interests providing distributions based on returns on the designated investment and including a senior equity interest and a junior equity interest, wherein the senior equity interest comprises (1) a preferred amount equity component to be paid in priority to the junior equity interest and (2) a first portion of a non-preferred equity component that is paid after satisfaction of the preferred amount; and   transferring title of the senior equity interest to a second investor in exchange for a payment and retaining the junior equity interest, thereby obtaining a liquidation of the designated investment while continuing to share in a potential up-side return based on the junior equity interest.   
     
     
         25 . The computer-implemented method of  claim 24 , further comprising:
 receiving a distribution of at least a portion of the returns on the designated investment.   
     
     
         26 . The computer-implemented system of  claim 24 , wherein the senior equity interest includes the preferred amount and a portion of a residual component of capital return following satisfaction of the preferred amount. 
     
     
         27 . The computer-implemented method of  claim 24 , wherein the preferred amount is 30% or less of a fair-market value of the designated assignment, thereby providing an equity interest that has the characteristics of an investment grade debt. 
     
     
         28 . The computer-implemented method of  claim 24 . wherein the investor receives funds corresponding to no greater than 30% of the fair-market value of the designated assignment, thereby obtaining no greater than 30% liquidity while maintaining a longer-term upside interest in the performance of the AI fund. 
     
     
         29 . The computer-implemented method of  claim 24 , wherein the investor's designated investment is an ownership interest in the AI fund. 
     
     
         30 . The computer-implemented method of  claim 24 . wherein the investor's designated investment is a right to distributions from the investor's ownership interest in the AI fund. 
     
     
         31 . The computer-implemented method of  claim 24 , further comprising:
 negotiating compositions and respective priorities of the senior equity interest and the junior equity interest with the second investor receiving the senior equity interest.   
     
     
         32 . The computer-implemented method of  claim 24 , further comprising:
 repurchasing or buying back all or a portion of the senior equity interest.   
     
     
         33 . The computer-implemented method of  claim 24 , further comprising:
 selling all or a portion of the junior equity interest to a third investor.   
     
     
         34 . A non-transitory computer readable medium comprising program instructions for obtaining liquidity to an AI fund through the use of a liquidation trust, wherein the AI fund comprises equity interest in investments selected from a group consisting of private equity funds, hedge funds, leveraged buyout funds, venture capital funds, partnerships, real estate investment trusts, real estate properties, and private company stocks, the program instructions comprising code for causing at least one computer processor to perform the following:
 designating an investor's investment in the AI fund for assignment to the liquidation trust;   agreeing to an establishment of at least two classes of trust equity interests based on the assignment, the two classes of trust equity interests providing distributions based on returns on the designated investment and including a senior equity interest and a junior equity interest, wherein the senior equity interest comprises (1) a preferred amount equity component to be paid in priority to the junior equity interest and (2) a first portion of a non-preferred equity component that is paid after satisfaction of the preferred amount; and   transferring title of the senior equity interest to a second investor in exchange for a payment and retaining the junior equity interest, thereby obtaining a liquidation of the designated investment while continuing to share in a potential up-side return based on the junior equity interest.   
     
     
         35 . A computer-implemented system for obtaining liquidity to an AI fund through the use of a liquidation trust, wherein the AI fund comprises equity interest in investments selected from a group consisting of private equity funds, hedge funds, leveraged buyout funds, venture capital funds, partnerships, real estate investment trusts, real estate properties, and private company stocks, the system comprising at least one processor and at least one storage medium adapted to perform the following:
 designating an investor's investment in the AI fund for assignment to the liquidation trust;   agreeing to an establishment of at least two classes of trust equity interests based on the assignment, the two classes of trust equity interests providing distributions based on returns on the designated investment and including a senior equity interest and a junior equity interest, wherein the senior equity interest comprises (1) a preferred amount equity component to be paid in priority to the junior equity interest and (2) a first portion of a non-preferred equity component that is paid after satisfaction of the preferred amount; and   transferring title of the senior equity interest to a second investor in exchange for a payment and retaining the junior equity interest, thereby obtaining a liquidation of the designated investment while continuing to share in a potential up-side return based on the junior equity interest.