In-house assets are investments in, loans to or assets leased to related parties. For example, if your fund owns shares in a private company that you control, these shares will be an in-house asset. Similarly, if you lend money to that private company or lease equipment to it, the loan or the equipment will be in-house assets.
In-house assets are not illegal, they are just restricted. The total amount invested in in-house assets is not allowed to exceed 5% of the total value of the fund’s assets.
There are some assets that are specifically exempt from being treated as in-house assets. A good example is commercial property (if it meets certain conditions). In other words, a fund could own a commercial property and lease it to a business controlled by a related party without being subject to the 5% limit.