The Four-Week Window: Allocation, Conflicts and Red Flags

Will not do: submit any client subscription before the red flags are resolved, and will not let the window or the largest client's pressure set the diligence timetable. A four-week window is a sales device; a fund that cannot accommodate reasonable diligence is telling you something.

Sequence:

1. Escalate to compliance in writing today - email is sufficient if the officer is unreachable; copy the CCO's deputy and create the record. Document that you raised the auditor and affiliate-administrator issues before any allocation.
2. Resolve the red flags or decline. An auditor resignation mid-year plus an affiliated administrator is a control environment problem until proven otherwise. Ask the GP for the resignation letter, the reason, the new auditor's engagement, and the administrator's fee arrangement and independence. If you cannot get satisfactory answers inside the window, the answer is no.
3. Suspend personal subscriptions by the advisers until pre-clearance is possible. Personal investing ahead of clients in a capacity-constrained opportunity is the classic front-running fact pattern, regardless of intent.
4. Do not allocate by arrival time. Apply the firm's written allocation policy.

Timing pressure is not a reason to skip a step; it is the reason the step exists.

On suitability and policy, not on revenue.

• The 5% illiquid cap client is capped regardless of demand. Confirm the current illiquid exposure in dollars before allocating anything; if the $10m request breaches the cap, the answer is a documented no, not a partial fill with a promise to rebalance later.
• The family office is entitled to the same process as everyone else. A $60m request that is 40% of capacity, made with a threat to leave, is precisely the situation in which a written policy protects both the firm and the smaller clients. Revenue concentration is a business risk for the firm's owners, not a factor the allocation policy may consider - and if the firm wants to change the policy, that is a separate, documented decision made by senior management, not by the DD analyst under deadline.
• Pro rata across eligible, suitable clients is the defensible default when demand exceeds capacity; a documented rotation or priority rule (e.g. by prior participation) is also acceptable if written in advance.

Disclose the allocation methodology to all clients who requested the fund, and record why each was filled, scaled, or declined. The test an examiner applies is not whether the outcome was equal - it is whether the rule existed before the allocation and was applied consistently.

Decline, and document the offer. It converts an operational concern into a conflict that touches the firm's fiduciary duty.

• Substance. The affiliated administrator is a genuine conflict at the fund level: NAV is struck by an entity the GP controls, in an asset class where valuation is already judgmental. Waiving review in exchange for capacity means selling diligence for allocation - the client pays for that, not the firm.
• Process. Report the offer to compliance and to the fund's independent directors or the client's consultant as appropriate. Consider whether the offer itself is a material fact about the GP's governance culture that should be disclosed to clients and weighed in the go/no-go decision.
• Personal exposure. As the analyst, you are a fiduciary to the clients and an employee with an AUM-linked bonus. That combination is exactly why the decision must be escalated rather than made by you alone - and why you should ask that your compensation not be a factor in the recommendation, in writing.
• If the firm overrides you, get the instruction in writing from a named senior officer after compliance review, and record your objection. Personal accountability does not disappear because a manager accepted the risk.

The allocation is worth refusing: capacity that can only be obtained by dropping diligence is capacity you do not want.