Global Investment Funds
A Practical Guide to Structuring, Raising and Managing Funds
Private investment funds are currently investing more capital than ever and the funds themselves are larger than ever. This practical guide features contributions by leading industry specialists on a wide range of issues arising at all stages of a private investment fund‘s life cycle.
This practical guide features contributions by leading industry specialists on a wide range of issues arising at all stages of a private investment fund‘s life cycle. Topics covered include formation and structuring, regulatory matters, limited partner issues and negotiations, deal-level considerations, environmental concerns and end-of-fund-life procedures, as well as jurisdictional/offshore matters, their jurisdictional differences and choice drivers (eg Luxembourg and Ireland). The guide also sets out and explores the particular issues presented in relation to listed funds, start-up and spin-out funds, real estate funds, infrastructure and energy funds, and secondary transactions.
In consequence, this publication provides a wide-ranging and practical guide to the legal, regulatory, tax and commercial elements of establishing and operating private investment funds. Practitioners and other industry participants are likely to gain significant benefit from applying its contents within their own environment.
Table of Contents
|Table of contents||3|
|Introduction to investment funds: structures and key drivers||5|
|The fund-raising process||13|
|EU regulation of fund managers and advisers||21|
|US SEC investment adviser \nregistration||35|
|Taxation in the investment management space||43|
|The limited partner’s perspective||55|
|Investor side letters||69|
|Private equity coinvestment||81|
|Transactional issues for funds||93|
|Navigating the end of life of a fund||105|
|When funds go bad – fund related disputes||117|
|Start-ups and spin-outs: establishing a credible investment advisory business and maximising success||133|
|Listed investment funds||143|
|Real estate funds||157|
|Energy funds and their industry||167|
|Investment funds in the energy sector||179|
|Funds and the environment: challenge or opportunity?||195|
|Drivers for the choice of fund domicile: a focus on Ireland||207|
|Drivers for the choice of fund domicile: a focus on Luxembourg||223|
|About the authors||239|
Partner, Latham & Watkins LLP
Tom Alabaster is a partner and co-head of the Investment Funds Practice of Latham & Watkins in London. Tom represents investment fund sponsors, investors and other market participants in Europe and internationally, maintaining a particular focus on US institutions operating in Europe, Asia and the Middle East.
Tom has more than 10 years’ experience advising on fund formation, structuring, joint ventures, sponsor equity, carry and governance issues and the related ongoing regulatory and compliance issues. He is also active in advising sponsors and institutional buyers in connection with the acquisition of, or investments in, investment management firms. Prior to joining Latham & Watkins, Tom served as a senior fund formation counsel at the Carlyle Group and as CCO for Europe. Before Carlyle, he worked in the investment management and private equity group of Debevoise & Plimpton in New York. Tom has been named by PEI’s Private Fund Management as one of the top 30 lawyers aged under 40 in fund formation globally and, with respect to his investment funds regulatory practice, described as “quickly becoming US managers’ go-to adviser for AIFMD guidance”.
Counsel, Arendt & Medernach
Adrian Aldinger is a counsel in the Private Equity and Real Estate Practice of Arendt & Medernach SA in Luxembourg.
He advises fund sponsors on all legal and regulatory aspects related to the structuring, formation and ongoing operation of alternative investment funds with a particular focus on real estate, private equity, debt and venture capital funds. Further areas of expertise include primary and secondary fund investments, fund governance and compliance as well as carried interest and co-investment arrangements. Adrian is admitted to the bars of Luxembourg and Berlin (Germany). He regularly publishes articles on regulatory and legal aspects of fund formation/management and is a lecturer in corporate law at the Luxembourg School for Commerce.
International counsel, Debevoise & Plimpton, Hong Kong
Gavin Anderson is an international counsel with Debevoise & Plimpton in Hong Kong. He advises sponsors and investors on matters including fund formation, fund marketing, separate accounts, coinvestments and carried interest arrangements.
His broad experience includes private equity, real estate, infrastructure, hedge and hybrid funds. He has acted on a number of landmark fundraisings, including the largest private equity fund ever raised by an Asia-based manager at that time. Gavin holds a BA (Hons) from the University of Oxford (Brasenose College), a PgDL from the College of Law at Guildford, and graduated from the Legal Practice Course at the Oxford Institute of Legal Practice.
Partner, Freshfields Bruckhaus Deringer
Jonathan Baird is a partner in Freshfields Bruckhaus Deringer’s corporate department based in London and specialises in investment fund, asset management and real estate related matters, including public and private capital raisings, as well as merger and acquisition activity. Jonathan has acted for issuers and investment banks on listings and capital raisings by listed investment companies in numerous countries across a range of asset classes.
He is qualified as a solicitor in England and Wales and as an attorney-at-law in New York and Illinois.
Partner, Head of Investment Funds Practice, Latham & Watkins LLP
Nick Benson is a partner and head of the Investment Funds Practice in the Corporate Department of Latham & Watkins in London. Since qualifying as a solicitor in 1999, Nick has represented sponsors and investors on the establishment and operation of numerous investment funds and fund management businesses, including heading the legal teams on the establishment of several highprofile multi-billion euro/dollar fundraisings and investment management platforms. In addition to his legal practice, Nick is a regular author, conference speaker and lecturer on the subject of investment funds.
Partner, Private Equity and Real Estate Practice, Arendt & Medernach
Camille Bourke is a partner in the Private Equity and Real Estate Practice of Arendt & Medernach. She specialises in the formation of alternative investment funds and also advises on private equity transactions.
Camille worked at the Luxembourg and Brussels offices and founded the London office in 2007 where she is now the resident partner. Prior to joining Arendt & Medernach, Camille practised in the New York office of Willkie Farr & Gallagher. She has been a member of the New York bar since 2001, the Paris bar since 2004 and has been admitted by the Luxembourg bar to practise in Luxembourg under her French professional title. Camille holds a degree in business law from the Université Paris II Panthéon-Assas as well as a Master’s degree (LLM) from Harvard University.
Partner, Kirkland & Ellis International LLP
Lisa Cawley is a partner in Kirkland & Ellis International LLP and has extensive experience in financial services regulation, gained over more than 20 years. She is recognised in Chambers, which has described her as an “oasis in the desert” when it comes to FCA regulation, and also “very precise and commercial” on AIFMD matters. It distinguishes her team as “the go-to source of counsel on the mutable regulatory landscape”. She is also recognised in Who’s Who Legal: Private Funds and Legal 500, where she is described as a “master at all things regulatory in Europe” who “knows how to address the regulatory complexities that have come out of the financial crisis”. In the IFLR1000 it is noted that “she is extremely knowledgeable and efficient. A fantastic attorney with extensive knowledge of the law and practical implications of the regulatory environment”. Lisa speaks, comments and writes regularly on regulatory matters and is an acknowledged authority in her field.
Vice president, Assistant general counsel, Riverstone Holdings LLC
Charles Chipchase is a vice president and assistant general counsel of Riverstone Holdings LLC based in London. Prior to joining Riverstone, he was general counsel of Tercel Oilfield Products, a private equity-owned oilfield services company. Prior to joining Tercel, he was an associate at Vinson & Elkins where he focused on domestic and cross-border mergers and acquisitions work in the energy sector. He received his MA in History from Edinburgh University and his Diploma in Law and Legal Practice from the College of Law. He is licensed to practise law in England and Wales.
Partner, Latham & Watkins LLP, Washington DC
Barton Clark is a partner in the Washington, DC office of Latham & Watkins LLP and serves as global co-chair of the Investment Funds Practice. His practice is focused on private equity capital formation, investment structuring and related transactions. He represents private equity funds and their sponsors and advisers, as well as other market participants, both in the United States and internationally. He also advises sponsors of private investment funds on registration, compliance and transactional matters under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. Barton earned his JD from the University of Chicago Law School, with honors, and his BA from Harvard University, magna cum laude. He is a member of the District of Columbia and New York State bars.
Partner, Head of the Tax Group, Macfarlanes
Damien Crossley is a partner and head of the Tax Group at Macfarlanes. He advises on a broad range of tax and structuring issues but specialises in the formation of private equity, special situation, credit, hedge and similar funds and their remuneration structures, and on structuring these funds’ investment transactions.
Damien spent a year on secondment at Paul Weiss in New York practising US tax and most of his work has an international dimension. Damien is a chartered tax adviser and regularly speaks and writes on tax matters.
Partner, Latham & Watkins LLP; Local chair, European environmental, land and resources department
Paul Davies is a partner in the London office of Latham & Watkins and is local chair of the European Environmental, Land and Resources Department. His practice focuses on the environmental aspects of corporate transactions, in addition to a wide variety of other work, including the management of contaminated land, the insurance of environmental risk, liaising with regulatory authorities, climate change, health and safety, asbestos and waste management issues. He was named as one of the 10 most innovative lawyers of the year in the FT Innovative Lawyers Awards 2013. He is the only European lawyer to be named as a Most Highly Regarded Individual by the International Who’s Who of Environmental Lawyers in 2011–2015.
Paul sits on the editorial boards of the Environmental Law Review and PLC Environment.
Partner, Latham & Watkins LLP
Tom Evans is a partner in the London office of Latham & Watkins. Tom is an M&A lawyer with more than 10 years’ experience advising on complex international and domestic M&A and corporate financing arrangements for leading private equity houses, infrastructure funds and limited partners.
Tom co-edits PE Views, the Latham & Watkins quarterly publication addressing significant legal, regulatory and market movements relevant to the private equity industry in Europe, and is a contributor to Private Equity: A Transactional Analysis (Globe Law and Business) and Private Equity Exits: A Practical Analysis (Globe Law and Business).
Partner, Investment Funds Practice, Maples and Calder, Dublin
John Gallagher is a partner in the Investment Funds Practice at Maples and Calder’s Dublin office. He holds a degree in law (with German) and has extensive experience in financial services and regulatory law, with a particular focus on the establishment, operation and ongoing maintenance of all types of investment funds (including UCITS and AIFMD-compliant funds) across a broad range of strategies (including private-equity style closedended funds and liquid alternatives).
He has worked on large master-feeder and managed account platforms and flagship ICAV platforms for large institutional asset managers and investment banks. He also advises service providers to funds (including AIFMs, UCITS management companies, investment managers, administrators and depositaries) on all Irish legal, regulatory and compliance matters and advises sponsors on choice of fund vehicles and domestic and cross-border structuring.
Partner, Latham & Watkins LLP, Washington DC
David Greene is a partner in the Washington, DC office of Latham & Watkins and a member of the firm’s Investment Funds Practice. David represents private fund sponsors and investors in forming, investing in and operating private funds and related alternative asset arrangements throughout the world.
His experience includes representing sponsors in their global fundraising activities; representing institutional investors in private investment activities; representing energy/infrastructure funds, natural resource funds, buyout funds, coinvestment funds, venture funds, real estate funds, and other private investment vehicles in investments, operations and exits; negotiating strategic relationships, operating joint ventures, co-investments, club arrangements and other long-term partnering arrangements; structuring investments and operations; structuring internal sponsor arrangements; representing sponsors and investors in secondary sales; and advising on securities law matters, including registration and compliance under the Investment Advisers Act of 1940 and exemptions under the Securities Act of 1933 and the Investment Company Act of 1940.
Partner, tax and benefits department, Ropes & Gray LLP
Kat Gregor is a partner in the tax and benefits department at Ropes & Gray, LLP, with a focus on partnership and international tax issues, particularly with respect to disputes with the IRS and other administrative bodies. Kat regularly represents private investment funds, institutional investors, private companies and high net-worth individuals before the US Tax Court, US Court of Federal Claims. Kat advises private investment fund managers on structuring and launching funds, and has worked extensively on fund investment and secondary transactions. She also represents public and private clients in ongoing tax issues, as well as merger, acquisition and restructuring transactions.
Kat previously practised as a CPA with a big four accounting firm, where she advised venture capital funds and their portfolio companies on tax compliance, planning and controversy matters.
Counsel, Latham & Watkins LLP
Nancy Kowalczyk is counsel at Latham & Watkins LLP and focuses her practice on the representation of investment advisers, private fund managers and other financial services companies. Nancy represents SEC-registered investment advisers with ongoing regulatory and compliance matters arising under the US Investment Advisers Act of 1940 and the US Investment Company Act of 1940, as well as with respect to SEC inspections. She has significant experience forming and representing various private funds and their sponsors, including private equity and hedge funds. She also advises clients regarding mergers, acquisitions, joint ventures and other transactions involving companies in the financial services industry and private offerings of securities. Nancy holds a BA from the University of Notre Dame and a JD from the University of Minnesota.
Partner, Former co-head of private investment funds practice group, Ropes & Gray LLP
Raj Marphatia is a partner in, and former co-head of, the Private Investment Funds Practice Group at Ropes & Gray, LLP. He is an expert in the full spectrum of private funds, including buyout funds, venture capital funds, hedge funds, fund of funds, and CBOs. He assists sponsors in forming, operating and investing in such funds, and also represents institutional investors (including endowments, pension funds, fund of funds, private foundations, family offices, and sovereign wealth funds) in investing in private investment funds, both in primary and secondary transactions. He also has extensive experience with M&A and spin-off transactions in the financial services industry.
Partner, Latham & Watkins LLP
Nathaniel Marrs is a partner in the Chicago office of Latham & Watkins and a member of Latham’s Investment Funds Practice. Mr Marrs represents sponsors and investors in the formation of, and investment in, private funds, with a particular focus on real estate funds. He has formed a variety of US and non-US real estate funds, including open-ended and closed-ended funds, for a range of institutional and principal-led sponsors. Mr Marrs is regularly recognised and recommended as a leading lawyer in private equity and investment fund formation by The Legal 500 and other publications, with The Legal 500 noting him as an “outstanding fund lawyer.” He is an active speaker on private equity and investment fund topics, including at University of Chicago Booth School of Business and Kellogg School of Management, and has authored numerous articles addressing private equity and investment fund topics.
Senior associate, Latham & Watkins LLP
Amanda Molter is a senior associate at Latham & Watkins LLP and a member of the firm’s Investment Funds Practice. Amanda advises private fund sponsors in the structuring, negotiation and operation of investment funds across a wide range of industries. She regularly advises clients on matters including structuring and negotiation of portfolio company investments and dispositions, acquisition of investment managers, investment adviser spinouts and separation arrangements, formation of joint ventures and the ongoing representation of joint venture participants. Amanda also represents investors in their private investment activities.
Frazer Money joined Macfarlanes in 2015. He advises on a broad range of tax and structuring matters but specialises in the taxation of alternative investment funds and their managers. He advises a range of asset managers on fundraisings, management remuneration, carried interest structuring and investment structuring.
Counsel, Latham & Watkins LLP
Jumana Rahman is a counsel in the London office of Latham & Watkins. She specialises in large and complex commercial cross-border litigation with a focus on funds litigation, as well as general banking and financial services disputes. Jumana is recommended for banking litigation in Chambers UK 2015, being described as “very talented” and is particularly known for her experience in offshore jurisdictions such as the Cayman Islands, the Bahamas and the British Virgin Islands as well as the United Kingdom. She has represented large corporates, global banking groups and other major financial institutions in various disputes involving, among other things, conflicts of interest, breach of fiduciary duty and breach of investment guidelines, as well as fraud, Ponzi schemes and insolvency situations. Jumana has published extensively on finance dispute issues, and co-authored the UK chapter of Thomson Reuters’ Global Guide to Class and Collective Actions, published in 2015.
Associate, Latham & Watkins LLP, Washington DC
Amy Rigdon practises in the areas of investment fund formation and operations and investment adviser representation in the Washington, DC office of Latham & Watkins. Her practice focuses on private equity funds, hedge funds, collective investment trusts, and other private investment funds and financial regulatory matters across a variety of industries, including energy, venture capital, real estate and buyout. Amy counsels investment advisers, onshore and offshore private investment funds, and other related clients in matters related to corporate and securities law. Her experience includes: raising investment funds, including drafting the fund offering materials and governing agreements and negotiating special terms and side letters with prospective investors and their counsel; advising on fund operations, including structuring portfolio company acquisitions and divestitures, co-investment programmes and management equity arrangements; and registering investment advisers with both state regulators and the Securities and Exchange Commission (SEC) and handling ongoing compliance matters.
Partner, Latham & Watkins LLP
Nabil Sabki is a partner of Latham & Watkins whose practice focuses on the representation of financial service companies such as registered investment advisers, private equity and hedge fund managers, private investment funds, registered mutual funds and business development companies. He has significant experience forming and representing various private funds and their sponsors, including both domestic and offshore hedge funds.
In addition, Mr Sabki advises clients in connection with complex financial services related transactions, including mergers and acquisitions, joint ventures and private securities offerings. Mr Sabki represents numerous registered investment advisers in connection with ongoing regulatory and compliance matters arising under both the Investment Advisers Act 1940 and the Investment Company Act 1940. He also frequently advises clients on SEC and SRO inspections and inquiries as well as companies on investment company status issues under the Investment Company Act 1940.
Partner, Latham & Watkins LLP
Nadia Sager is a partner at Latham & Watkins LLP and a member of the firm’s Investment Funds Practice. She represents top private fund sponsors and investors in forming, investing in and operating leading private funds and co-investment vehicles globally. Nadia also represents sponsors and investors in investment advisory mergers, acquisitions, separations and spin-outs, including sales and acquisitions of both passive and control interests in sponsor firms and the start-up of new private investment firms through spin-outs and separations. For nearly 20 years, she has been a trusted adviser to high-profile clients on their global fundraising, investment and M&A activities across the buyout, energy, infrastructure, real estate, hedge, venture capital and other industries. She is local chair of the Corporate Department and also serves as global chair of the firm’s Diversity Leadership Committee, which leads the firm’s innovative global diversity strategy across 31 offices and 13 countries, and was recognised by Profiles in Diversity Journal as a 2015 Diversity Leader.
Founder partner, Managing principal, Coretrust Capital Partners
John Sischo is a founding partner and managing principal of Coretrust Capital Partners. The company, formed in 2014, is the private successor to Thomas Properties Group, Inc (NYSE: TPGI). Coretrust is a vertically integrated real estate office company that invests in major domestic markets. Coretrust closed its first discretionary equity fund in 2015 with the ability to acquire up to $1 billion of office assets nationwide. John was a founding partner and TPGI’s co-chief operating officer. He was a member of the firm’s board of directors, executive committee and investment committee. He led TPGI’s capital market activities, investment management business, the acquisition of over $3 billion of operating properties in discretionary fund format, and its IPO and secondary offering. John joined TPGI in 1998 as its chief financial officer after leading Bankers Trust’s real estate practice in Los Angeles. He started his real estate career at Merrill Lynch Capital Markets and Security Pacific Corporation. John earned a BA from the University of California at Los Angeles.
Regulatory associate, Kirkland & Ellis International LLP
Adam Skinner is a regulatory associate in the London office of Kirkland & Ellis International LLP. Adam has experience in financial regulation and funds matters, including work relating to the interpretation of the Financial Services and Markets Act 2000 (FSMA) and the secondary legislation that supports it as well as the rules of the Financial Conduct Authority and the Prudential Regulation Authority. Adam also advises on the Alternative Investment Fund Managers Directive and has assisted with the establishment of new investment businesses in the United Kingdom, the negotiation of regulatory approval for changes of control and the management of regulatory issues in connection with fund structuring and marketing.
Partner, Maples & Calder, Dublin
Peter Stapleton is a partner in the Investment Funds group in Maples and Calder’s Dublin office. He regularly advises investors, promoters, fund managers and investment banks on the establishment, structuring, financing, public and private distribution and ongoing operation of UCITS and AIFs, including hedge funds, funds of funds, master-feeders, private equity funds, managed account platforms and bespoke structures. Peter also has significant expertise advising in the areas of derivatives, prime brokerage, investment services and securities law. Peter is widely recognised as a leading lawyer in the financial services arena in Ireland and has been recommended by industry journals including IFLR1000, Legal 500 and Who’s Who Legal. Peter has been nominated as one of the outstanding practitioners in investment funds in the Guide to the World’s Leading Banking, Finance and Transactional Lawyers. Clients commend him for his “superior understanding of all issues related to funds formation” and have described Peter as “the AIFMD guru”.
Senior associate, Latham & Watkins LLP, London
Huw Thomas is a senior associate in Latham & Watkins’ London office and focuses on private equity, mergers and acquisitions, joint ventures, corporate restructurings and general corporate matters. Huw has provided legal advice to private equity sponsors and other financial institutions and corporates across a wide range of industry sectors and has particular experience in the energy, infrastructure and financial services sectors.
He has contributed to a number of publications, including Private Equity: A Transactional Analysis.
Asscoiate, Latham & Watkins LLP
Zach Thompson is an associate at Latham & Watkins LLP and a member of the firm’s Investment Funds Practice. Zach represents private investment fund sponsors in their global fundraising and co-investment activities. He has additional experience in investment advisory mergers and acquisitions, as well as representation of joint venture participants.
Partner, Willkie Farr & Gallagher (UK) LLP
Solomon Wifa is a partner in the Willkie Farr & Gallagher (UK) LLP Asset Management Group. A well-established investment funds lawyer with extensive experience across a diverse range of asset classes and secondary transactions. He represents sponsors in the formation of, and institutional investors investing in, private equity, hedge, debt, mezzanine, infrastructure, real estate, energy and venture capital funds across a variety of sectors.