Alternative Investment Funds 2019

The International Comparative Legal Guide to: Alternative Investment Funds 2019

7th Edition

A practical cross-border insight into Alternative Investment Funds work

Published by Global Legal Group, with contributions from:

Advokatfirmaet Schjødt AS Johnson Winter & Slattery Anderson Mori & Tomotsune LACOURTE RAQUIN TATAR Attorneys-at-Law Trust Lee & Ko Bär & Karrer Ltd. Legance – Avvocati Associati Bonn & Schmitt Magnusson Advokatbyrå Brodies LLP Maples Group Cadwalader, Wickersham & Taft LLP McCarthy Tétrault LLP Cases & Lacambra Mori Hamada & Matsumoto CNPLaw LLP PricewaterhouseCoopers Ltd Collas Crill LLP sammut.legal Davis Polk & Wardwell LLP Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Dillon Eustace Travers Smith LLP Dubiński Jeleński Masiarz i Wspólnicy sp.k. VdA Finnius Vivien Teu & Co LLP Flick Gocke Schaumburg Walkers (Bermuda) Limited Hassans International Law Firm Webber Wentzel The International Comparative Legal Guide to: Alternative Investment Funds 2019

General Chapters: 1 Operating Private Funds in 2019: Transparency is Key – Greg Norman, Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 1 2 The Global Subscription Credit Facility and Fund Finance Markets – Key Trends and Forecasts – Michael C. Mascia & Wesley A. Misson, Cadwalader, Wickersham & Taft LLP 3

Contributing Editor 3 Adviser Exams: Mitigating Enforcement Risks – Leor Landa & James H. R. Windels, Skadden, Arps, Slate, Davis Polk & Wardwell LLP 7 Meagher & Flom LLP and Affiliates 4 Bringing Foreign Investment Funds into Japan – Yasuzo Takeno & Fumiharu Hiromoto, Mori Hamada & Matsumoto 15 Publisher Rory Smith Sales Director Country Question and Answer Chapters: Florjan Osmani 5 Andorra Cases & Lacambra: Miguel Cases & Marc Ambrós 20 Account Director Oliver Smith 6 Angola VdA: Pedro Simões Coelho & Carlos Filipe Couto 27

Senior Editors 7 Australia Johnson Winter & Slattery: Austin Bell & Andy Milidoni 34 Caroline Collingwood 8 Bermuda Walkers (Bermuda) Limited: Sarah Demerling & Nathalie West 45 Rachel Williams 9 Canada McCarthy Tétrault LLP: Sean D. Sadler & Cristian O. Blidariu 55 Group Consulting Editor Alan Falach 10 Cayman Islands Maples Group: Grant Dixon & Andrew Keast 63 11 Cyprus PricewaterhouseCoopers Ltd: Andreas Yiasemides & Constantinos A. Constantinou 71 Published by 12 England & Wales Travers Smith LLP: Jeremy Elmore & Emily Clark 81 Global Legal Group Ltd. 59 Tanner Street 13 Finland Attorneys-at-Law Trust: Mika J. Lehtimäki 92 London SE1 3PL, UK 14 France LACOURTE RAQUIN TATAR: Damien Luqué & Martin Jarrige de la Sizeranne 99 Tel: +44 20 7367 0720 Fax: +44 20 7407 5255 15 Germany Flick Gocke Schaumburg: Christian Schatz 110 Email: [email protected] 16 Gibraltar Hassans International Law Firm: James Lasry & John Gordon 115 URL: www.glgroup.co.uk 17 Hong Kong Vivien Teu & Co LLP: Vivien Teu & Sarah He 121 GLG Cover Design F&F Studio Design 18 Ireland Dillon Eustace: Brian Kelliher & Sean Murray 132

GLG Cover Image Source 19 Italy Legance – Avvocati Associati: Barbara Sancisi & Marco Graziani 143 iStockphoto 20 Japan Anderson Mori & Tomotsune: Koichi Miyamoto & Takahiko Yamada 151 Printed by 21 Jersey Collas Crill LLP: Dilmun Leach & David Walters 159 Stephens & George Print Group 22 Korea Lee & Ko: Nelson K. AHN & Hyun KIM 165 August 2019 23 Luxembourg Bonn & Schmitt: Amélie Thévenart 172 Copyright © 2019 24 Malta sammut.legal: Karl Sammut & Bradley Gatt 180 Global Legal Group Ltd. All rights reserved 25 Mozambique VdA: Pedro Simões Coelho & Carlos Filipe Couto 188 No photocopying 26 Netherlands Finnius: Rosemarĳn Labeur & Tim de Wit 195

ISBN 978-1-912509-91-1 27 Norway Advokatfirmaet Schjødt AS: Andreas Lowzow & Cecilie Amdahl 202 ISSN 2051-9613 28 Poland Dubiński Jeleński Masiarz i Wspólnicy sp.k.: Zuzanna Mariańska-Masiarz & Strategic Partners Michał Żwirski 207 29 Portugal VdA: Pedro Simões Coelho & Inês Moreira dos Santos 214 30 Scotland Brodies LLP: Andrew Akintewe 225 31 Singapore CNPLaw LLP: Amit R. Dhume & Abel Ho 234 32 South Africa Webber Wentzel: Nicole Paige & Gitte Truter 243 33 Spain Cases & Lacambra: Miguel Cases & Toni Barios 250

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PEFC/16-33-254 www.pefc.org 36 USA Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates: Heather Cruz & Anna Rips 275

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WWW.ICLG.COM chapter 1 operating Private funds in 2019: transparency is Key skadden, arps, slate, meagher & flom llP and afﬁliates greg norman

In 2019, the private fund industry seems to have regained, and small challenge for fund sponsors who would have become adapted exceeded, its pre-crisis position at the forefront of the financial to a relatively stable period of regulation relating to private funds. services industry. In the years preceding 2018, private funds In addition, 2019 has also seen the Institutional Limited Partners achieved record-breaking years of fundraisings as an increasing Association (ILPA) publish an update to its principles for number of investors redoubled their allocation or made allocations transparency, governance and alignment of interest in private equity. for the first time to private funds. 2018 saw the fundraising Since the first publication of the ILPA Principles, there has been a landscape show some signs of market divergence; whilst large funds strong line taken on alignment of interest and its implications for have experienced further growth, smaller funds and first time private equity fund economics. The third edition of the ILPA managers have not always been as successful in their marketing Principles shows a clear trend towards increasing transparency, efforts. Nevertheless, many were expecting 2019 to herald a new including in areas such as fee and expense reporting, notification of record year of deal-making and activity from private funds, as some key events such as significant personnel changes (going beyond just reports set dry powder (the amount of unspent capital commitments key man changes) and disclosure of standards of care. The ILPA held by private funds) to be at a record $2 trillion. Despite this, Principles have not been broadly adopted by fund sponsors, private fund activity has arguably been rather muted. In the UK, it particularly given that most of the significant private fund sponsors has been quasi-impossible to pass a day without reading about have long established terms for their fund documents that are Brexit. At the time of writing, the UK was due to leave the EU on routinely accepted by investors. Nevertheless, a number of the Halloween under the leadership of a new Prime Minister – it suggestions, particularly with regard to transparency and reporting remains to be seen whether he will have any nightmares on 1 would appear to be a sensible benchmark – not least because many November. Looking to the global macro-economic environment, fund sponsors are already providing much of this transparency in the uncertainty regarding US-China relations and elsewhere seems one form or another. As investors become more sophisticated and to have had a dampening effect on world trade. contribute greater allocations to private funds, the desire for Against that backdrop, it seems that 2019 may be memorable for standardised reporting and information is only likely to increase. other reasons. For the private fund community, increased focus on The private fund industry may also do well to consider some form of information and transparency appears to be a recurring theme. In self-regulation in this area. In early 2019, the European Securities 2019, information is king (or queen). Outside of the private fund and Markets Authority (ESMA) published a report exploring world, we have seen the EU’s General Data Protection Regulation whether the objectives of the Alternative Investment Fund Managers (the GDPR ) start to bite, with various regulators across the EU Directive (the AIFMD) had been met. ESMA commissioned KPMG opting to hand out record breaking fines. Most recently, British to produce this report and its contents seem to signal that “AIFMD Airways received a fine of £183 million from the UK Information II” may be just over the horizon. One of the core aims of the AIFMD Commissioner’s Office. was to improve investor protection, particularly by increasing Private fund managers were never meant to be high on the list of information and disclosure. As the report published by ESMA “targets” for the GDPR, but nevertheless it has been high on the shows, very few investors feel that this aim has been achieved. agenda for most operations teams within private fund sponsors. For Instead, fund sponsors have had a significant increase in regulatory such teams, enhancing or improving internal systems and controls, reporting obligations, but regulators have been unable to do anything including those relating to data security, has long been on the with the information, and investors have not seen any tangible agenda. 2018 highlighted a number of operational failings in fund benefit while having to bear the increased costs associated with this management and other financial services businesses, particularly compliance. It seems likely therefore that one focus of any successor with respect to the systems and controls procedures. For example, to the AIFMD will be to seek to harmonise and increase reporting by in one instance a manager’s systems and controls failed to prevent private funds. One lesson that can be taken from the process through the comingling of investors’ cash with that of the fund manager. which the original AIFMD developed, was that having demonstrable Investors in private funds are also focussed on increased self-regulation can actually have a positive impact: if the private fund information. Due diligence by investors, particularly on new fund industry can successfully demonstrate that it already provides managers, has intensified as more detailed information, site visits investors with appropriate levels of transparency and reporting, then and time with key staff are requested. Private fund sponsors are the impact of any regulation in this area may be mitigated, not least having to allocate more time and resources to ensure that their because appropriate standards will already be in place. systems and controls are able to manage this level of scrutiny. With the speed of change in technology and related regulation, it is no iclg to: alternative investment funds 2019 www.iclg.com 1 © Published and reproduced with kind permission by Global Legal Group Ltd, London skadden operating Private funds in 2019: transparency is Key

Greg Norman Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 40 Bank Street, Canary Wharf London, E14 5DS United Kingdom

Tel: +44 20 7519 7192 Email: [email protected] URL: www.skadden.com

Greg Norman is a Counsel at Skadden, Arps, Slate, Meagher & Flom in its Investment Management Group.

Skadden is one of the world’s leading law firms, serving clients in every major financial centre with over 1,700 lawyers in 22 locations. Our strategically positioned offices across Europe, the U.S. and Asia allow us proximity to our clients and their operations. For almost 60 years Skadden has provided a wide array of legal services to the corporate, industrial, financial and governmental communities around the world. We have represented numerous governments, many of the largest banks, including virtually all of the leading investment banks, and the major insurance and financial services companies.

2 www.iclg.com iclg to: alternative investment funds 2019 © Published and reproduced with kind permission by Global Legal Group Ltd, London Current titles in the ICLG series include:

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