Equalization is a mechanism used in many private markets funds to ensure fairness between early and later investors. It functions like an interest expense that later investors pay to earlier investors, compensating them for having their money invested in the fund for a longer period.
After a fund's first monthly closing, all subsequent investors are subject to a one-time equalization expense. For most funds, this expense is an 8% annualized rate (approximately 0.67% per month), based on the time between the fund’s first closing and the later investor’s closing.
Once a fund's syndication period is closed, each investor will be allocated their share of the equalization expense — called a “true up”.
Most Yieldstreet funds that are structured as an SPV use equalization. Review the "Essentials" section of a fund to see if it uses equalization.