A Question Investors Rarely Ask Until It's Too Late
Fund marketing conversations focus on strategy, returns, and fees. Almost nobody asks — or is proactively told — what happens to their AIF holding if they die during the fund's multi-year tenure. Given AIFs often lock up capital for 7-10 years or more, this isn't a hypothetical worth ignoring.
Transmission vs Transfer: Understanding the Distinction
It's worth being precise about terminology here. A "secondary transfer" is a voluntary sale of units by a living investor to another party, subject to restrictions like right-of-first-refusal provisions. "Transmission" is different — it's the transfer of units to legal heirs or nominees following the investor's death, generally not subject to the same voluntary-transfer restrictions.
The Nomination Facility: Your First Line of Defence
Most AIFs allow investors to register a nomination at subscription (or afterward), designating who should receive their units on death. This is directly analogous to nomination facilities available on bank accounts or mutual fund folios, and it exists for the same reason — to streamline what would otherwise be a considerably more document-intensive process.
What a Nominee Actually Receives
This is a subtlety worth understanding clearly: nomination is generally understood to facilitate a streamlined process for the nominee to receive the units, but it does not necessarily override the legal rights of the deceased investor's actual legal heirs under succession law. In other words, a nominee may receive the units in a capacity that still needs to be reconciled with broader succession entitlements, depending on the specific legal framework and family circumstances — this is a nuance every investor should understand rather than assume nomination alone fully resolves succession.
If There's No Nomination Registered
Without a valid nomination, transmission typically requires the fund to be satisfied of the claimant's legal entitlement through standard succession documentation — a succession certificate, probated will, or letters of administration, depending on applicable personal law and specific facts. This is a considerably lengthier, more document-intensive process than transmission to a registered nominee, often taking months longer at a time when the investor's family has enough else to manage.
What Happens to Undrawn Commitment Obligations
Here's a detail investors often miss: the remaining undrawn commitment obligation — the portion of committed capital not yet called — generally passes along with the units to the transmittee. This means heirs inherit not just the economic value of the existing holding, but a continuing contractual obligation to fund future capital calls, unless the fund's specific documentation provides otherwise.
Multiple Heirs, One Holding
Where an investor dies intestate or a will designates multiple beneficiaries, the fund typically requires the heirs to jointly designate how the holding and capital account will be administered — usually through a single designated representative for communications and instructions — to avoid the operational difficulty of dealing separately with multiple parties for what remains, from the fund's perspective, a single holding.
Documentation the Fund Manager Will Require
Expect to need: a death certificate, evidence of nominee registration (or appropriate succession documentation where no nomination exists), and updated KYC/eligibility documentation for the transmittee — essentially standard investor onboarding requirements adapted for the transmission context.
Why Fund Managers Should Proactively Push This, Not Wait to Be Asked
The absence of a registered nomination significantly complicates and delays transmission precisely when an investor's family is least equipped to navigate a complex financial process. Fund managers who proactively encourage nomination registration at onboarding are providing genuinely better investor service — and reducing their own administrative burden down the line.
Building Clear Succession Processes Into Fund Administration
We help fund managers design clear nomination and transmission processes, and we advise investors and their families on navigating transmission when the need arises.
This article is for general informational purposes and does not constitute legal or tax advice on succession, nomination, or transmission specific to any investor's circumstances.