Venture capital funds often have as investors pension plans covered by Employee Retirement Security Act of 1974 ("ERISA"). When these plans invest in a venture capital fund, all of the fund's assets (such as its investments in portfolio companies) will be treated as assets of the ERISA plan, in the absence of an exemption from such requirements. A venture capital fund will want to avoid this since the persons responsible for managing the assets of an ERISA plan have significant fiduciary duties under ERISA and cannot engage in certain transactions prohibited by ERISA. The U.S. Department of Labor, which administers ERISA, has issued regulations that contain certain exemptions from the plan assets rules. Under one exemption, a venture capital fund is not deemed to hold ERISA plan assets if it qualifies as a venture capital operating company or "VCOC". To be a VCOC, the fund must have at least 50% of its assets invested in venture capital investments. An investment in a portfolio company qualifies as a "venture capital investment" if the fund obtains certain management rights with respect to the portfolio company. "Management rights" are defined as contractual rights running directly from the portfolio company to the fund that give the fund the right to participate substantially in, or substantially influence the conduct of, the management of the portfolio company. In support of its exemption from the ERISA plan asset rules, a venture capital fund will, as a result, generally ask each of its portfolio companies to sign a management rights letter in connection with the fund's initial investment in such company.