Investment Funds 2020

Investment Funds 2020 features 25 jurisdictions. This edition of Investment Funds provides guidance on current investment markets, alternative investment funds, retail funds and legal, regulatory or tax changes.

Last Updated: February 17, 2020


Authors



Travers Smith LLP has four partners and 15 other dedicated fee earners in its funds department, based in London. The group focuses on funds, investors and intermediaries in the private equity, infrastructure, debt, real estate and listed equities sectors. It has constantly been at the forefront of developing market practice and thought on relevant changes for the investment funds industry, including the European Alternative Investment Funds Managers Directive and, more recently, the potential impact of Brexit. The funds tax group advises on the structuring of investment funds to maximise their tax efficiency for investors and managers. The funds department sits alongside the firm’s market-leading private equity M&A practice, which is one of the largest transactional teams of private equity lawyers in the City. The funds finance practice combines expertise from the firm’s fund formation and finance practices to advise lenders that provide subscription line and other facilities to real estate funds. Travers Smith also advises real estate funds on the borrower side. The funds department is best known for advising private funds and closed-end listed funds.


This cross-border legal guide provides a global comparison of fundamental legal, tax and regulatory considerations relating to the establishment and operation of investment funds in a range of jurisdictions where the industry is active. Each chapter is written by leading legal advisers from the relevant jurisdiction, providing information on the structures typically used, the regulatory framework for those funds, any significant operational requirements, how the funds may be marketed, a summary of the tax treatment for both the fund itself and investors, and customary or common terms.

This guide seeks to provide guidance on the key questions arising when industry participants are seeking to establish, operate, market and/or invest in an investment fund. Investment funds often operate across multiple jurisdictions. Those who understand the global landscape will be at a distinct commercial advantage, as well as minimising their risk of falling foul of local laws.

Some of the key objectives when setting up an investment fund, which are discussed in this book, include:

  • Choice of domicile: there are a multitude of different legal structures available, and each jurisdiction applies its own legal and regulatory framework. Certain jurisdictions are traditionally utilised for certain strategies. However, ongoing legal developments in those jurisdictions, coupled with attractive investment funds regimes being introduced and/or modernised in the less obvious choices of jurisdictions seeking to compete with more established jurisdictions, means that the domicile used by a manager for its last fund may not be the best option for its next fund. We hope that this guide will help provide you with the most up-to-date information on the typical forms of investment fund vehicles available in each jurisdiction to assist in making decisions relating to domicile.
  • Asset class: there is also a wide variety of asset classes that are captured within the market, from traditional long-only equity funds through to leveraged buyout funds and hedge funds. Funds for different asset classes will have their own bespoke features and requirements. The industry develops in response to demand and now offers many ways for investors to customise their exposure to certain asset classes. Current trends, such as secondaries transactions, long-duration funds and capital call lines of credit, demonstrate that the investment funds industry is flexible and accommodating to investors.
  • Regulatory and tax considerations: in the ten-year period since the 2007-2008 Global Financial Crisis, there have been various tax and regulatory developments in numerous jurisdictions that have affected the structuring of investment funds. Without doubt, the number of legal, tax and regulatory issues that have to be considered when establishing an investment fund has increased significantly, and the regulators and tax authorities across the world are introducing more complex reforms. If a fund manager does not comply with these requirements, the consequences can lead to significant fines or, in extreme cases, custodial sentences. It is, therefore, important to understand the applicable requirements in jurisdictions where the fund or manager is doing business.
  • Investor base: another key objective when structuring an investment fund is ensuring that the fund is suitable for its proposed investors, whether that will be institutional investors or retail investors, or a combination of both. The investment funds industry is a global market, so funds will often be marketed to investors in multiple jurisdictions. Therefore, a fund needs to be flexible enough to be adapted to different groups of investors, it needs to be capable of being marketed in different jurisdictions, and it needs to be sufficiently familiar to investors. The manager and sponsor will, therefore, need to consider and take advice on the securities and marketing laws and regulations in the fund's target jurisdictions. In many jurisdictions, the marketing or distribution of an investment fund is restricted to certain categories of investor – eg, "professional" or "sophisticated" investors (ie, not to the public at large). Funds that are targeted at retail investors are, on the whole, subject to a higher level of regulatory scrutiny and operating restrictions.

About This Guide

To try and provide a framework for each chapter, we have focused on two categorisations of "investment funds": "alternative investment funds" and "retail funds". There will obviously be overlaps between these two categories, and some strategies or structures will not be adequately catered for (an obvious example being listed funds aimed at institutional investors). However, the suggested split is intended to be as follows:

  • Alternative Investment Funds cover the non-traditional private fund strategies such as private equity, venture capital, infrastructure, hedge funds and real estate.
  • Retail Funds cover the traditional mutual, authorised, regulated or registered funds that are commonly available to the public and, therefore, are not usually offered on a private placement basis. For this reason, retail funds have historically been more heavily regulated than other types of funds.

This book not only sets out the information needed, but also provides a network of leading experts from independent law firms around the world who can be called upon to provide advice. The chapters in this guide have been written by some of the leading legal investment funds practitioners around the world: we thank each of them for contributing their invaluable and highly relevant industry comments.

Authors



Travers Smith LLP has four partners and 15 other dedicated fee earners in its funds department, based in London. The group focuses on funds, investors and intermediaries in the private equity, infrastructure, debt, real estate and listed equities sectors. It has constantly been at the forefront of developing market practice and thought on relevant changes for the investment funds industry, including the European Alternative Investment Funds Managers Directive and, more recently, the potential impact of Brexit. The funds tax group advises on the structuring of investment funds to maximise their tax efficiency for investors and managers. The funds department sits alongside the firm’s market-leading private equity M&A practice, which is one of the largest transactional teams of private equity lawyers in the City. The funds finance practice combines expertise from the firm’s fund formation and finance practices to advise lenders that provide subscription line and other facilities to real estate funds. Travers Smith also advises real estate funds on the borrower side. The funds department is best known for advising private funds and closed-end listed funds.