Depositary Oversight: PE vs Real Estate

GOT YOUR BACK is the depositary for Alternative Investment Funds managing hundreds of billions SEK invested in Real Estate and Private Equity.

Lina Fernström, Depositary Manager, talks about key differences in this work. 

What does a depositary do, and how does the work differ between real estate and private equity funds?

 A depositary acts as an independent guardian of a fund’s assets, meaning that we verify ownership, monitor cash flows, and oversee the AIFM to protect investors. Our oversight is always risk‑based and adapted to the fund’s strategy, because the risks differ significantly between Private Equity and Real Estate AIFs.

For Private Equity funds, the fund often owns portfolio companies through layered holding structures. PE funds typically build portfolios around specific sectors or themes, and during the investment phase our focus is on transaction oversight, ensuring acquisitions follow the fund’s mandate, that approval processes are followed, and that capital calls and financing flows are correctly executed.

When a PE fund moves into its ownership phase, the oversight shifts. For value‑creation strategies, we follow developments in the portfolio companies, operational improvements, add‑on acquisitions, restructurings, to ensure actions stay aligned with the investment strategy. For more long‑term holdings, we concentrate on governance, financing, distributions, and ongoing compliance.

For Real Estate funds, the fund is the indirect owner of physical properties. Many RE funds diversify across property types or investment themes. In the build‑up phase, our focus lies on the acquisition process, making sure each transaction meets the investment criteria, complies with limits, and follows the required investment procedures.

During the holding phase, our monitoring adjusts accordingly: in value‑add funds, we follow development progress, refurbishments, and enhancement activities, while in core funds the focus is on leasing activities, rental income, and compliance with financing and operational requirements.

How does cash-flow monitoring work in practice for these two fund types?

Cash‑flow oversight is essential for both fund types, but the patterns differ.

In Real Estate funds, cash flows are often predictable for core strategies but can vary significantly for value‑add funds where CAPEX, redevelopment costs and additional project expenses play a larger role. Here we focus on large or unusual transactions and assess whether they align with the fund’s expected cash‑flow profile. To do this well, it’s crucial that a depositary truly understands the client’s business and the assets.

In Private Equity, cash flow is driven by capital calls, portfolio company distributions, and management fees. We verify that drawdown notices match investor agreements, ensure waterfalls for carried interest are applied correctly, and monitor potential overcalls. Exits can also be more complex—whether through a sale or an IPO—requiring different controls and checks.

For both fund types, deep understanding of the fund’s business model is key. At GOT YOUR BACK, we secure this through our annual due diligence of fund managers and annual risk assessments of individual funds. These processes allow us to review internal governance documents and establish the right controls for each fund to ensure strong investor protection.

In your experience, what specific risks or challenges arise depending on the fund type?

From a depositary standpoint, the risks really depend on the type of fund. For Private Equity funds, the biggest challenges typically come from complex transaction structures and valuation uncertainty.

For Real Estate funds, the key risks lie in property acquisitions, title verification, and the stability of rental income or development projects. Our role is to ensure each investment meets the investment criteria, ownership is properly documented, and that the ongoing activities, being rental strategies or refurbishment, are managed in line with the fund’s rules.

Across both fund types, our job is to provide that independent layer of oversight so investors can trust that their assets are safeguarded and the fund is being run as intended.

Why is the choice of depositary becoming an increasingly important decision for fund managers?

Beyond the regulatory requirements, including the new provisions under AIFMD II, we see a clear trend that institutional investors increasingly evaluate the depositary when conducting due diligence on AIFMs. Having an experienced depositary with a solid track record in the specific asset class is becoming a decisive factor for investors when selecting where to commit capital.

For more information about GOT YOUR BACK's depositary services, please contact Lina Fernström, Joakim Sjöberg or Peter Wallqvist