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ICLG The International Comparative Legal Guide to: Alternative Investment Funds 2017 5th Edition A practical cross-border insight into Alternative Investment Funds work Published by Global Legal Group, in association with AIMA, with contributions from: Andreas M. Sofocleous & Co LLC König Rebholz Zechberger Attorneys at Law Babbé LLP Lenz & Staehelin Bae, Kim & Lee LLC Maples and Calder Bonn & Schmitt McCarthy Tétrault LLP Brodies LLP Mori Hamada & Matsumoto Cadwalader, Wickersham & Taft LLP Skadden, Arps, Slate, Meagher & Flom LLP Cases & Lacambra and Affiliates Davis Polk & Wardwell LLP Taylors (in Association with Walkers) Dillon Eustace Travers Smith LLP FenXun Partners VdA Vieira de Almeida Ferraiuoli LLC WongPartnership LLP Horten Advokatpartnerselskab WTS Tax Legal Consulting Jones Day The International Comparative Legal Guide to: Alternative Investment Funds 2017 General Chapters: 1 How External Forces Will Shape Fund Terms – Stephen G. Sims & 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 Stephen G. Sims, 3 Allocating Fees and Expenses: The SEC Is Paying Close Attention – Leor Landa & James H. R. Windels, Skadden, Arps, Slate, Davis Polk & Wardwell LLP 6 Meagher & Flom LLP and Affiliates 4 Bringing Foreign Investment Funds into Japan – Yasuzo Takeno & Fumiharu Hiromoto, Mori Hamada & Matsumoto 13 Sales Director Florjan Osmani Account Director Country Question and Answer Chapters: Oliver Smith 5 Andorra Cases & Lacambra: Miguel Cases 18 Sales Support Manager Paul Mochalski 6 Angola VdA Vieira de Almeida: Pedro Simões Coelho & Alexandre Norinho Oliveira 23 Sub Editor Nicholas Catlin 7 Bermuda Taylors (in Association with Walkers): Jonathan Betts & Ariane West 29 Senior Editors 8 British Virgin Islands Maples and Calder: Richard May & Heidi de Vries 37 Suzie Levy, Rachel Williams Chief Operating Officer 9 Canada McCarthy Tétrault LLP: Sean D. Sadler & Nigel P. J. Johnston 45 Dror Levy Group Consulting Editor 10 Cayman Islands Maples and Calder: Grant Dixon & Andrew Keast 52 Alan Falach 11 China FenXun Partners: Sue Liu 58 Publisher Rory Smith 12 Cyprus Andreas M. Sofocleous & Co LLC: Christina Sofocleous & Published by Antigoni Hadjiyianni 63 Global Legal Group Ltd. 59 Tanner Street 13 Denmark Horten Advokatpartnerselskab: Claus Bennetsen 69 London SE1 3PL, UK Tel: +44 20 7367 0720 14 England & Wales Travers Smith LLP: Jeremy Elmore & Emily Clark 76 Fax: +44 20 7407 5255 Email: [email protected] 15 France Jones Day: Florence Moulin & Guillaume Cavalin 85 URL: www.glgroup.co.uk GLG Cover Design 16 Germany WTS Tax Legal Consulting: Steffen Gnutzmann & Robert Welzel 91 F&F Studio Design 17 Guernsey Babbé LLP: Robert Varley & Chris Dye 98 GLG Cover Image Source iStockphoto 18 Ireland Dillon Eustace: Brian Kelliher & Sean Murray 104 Printed by Ashford Colour Press Ltd 19 Korea Bae, Kim & Lee LLC: Tongeun Kim & Dongwook Kang 113 June 2017 20 Liechtenstein König Rebholz Zechberger Attorneys at Law: Dr. Helene Rebholz 121 Copyright © 2017 Global Legal Group Ltd. 21 Luxembourg Bonn & Schmitt: Corinne Philippe & Amélie Thevenart 127 All rights reserved No photocopying 22 Mozambique VdA Vieira de Almeida: Pedro Simões Coelho & Carlos Filipe Couto 134 ISBN 978-1-911367-55-0 ISSN 2051-9613 23 Portugal VdA Vieira de Almeida: Pedro Simões Coelho & Manuel Simões de Carvalho 140 Strategic Partners 24 Puerto Rico Ferraiuoli LLC: Yarot T. Lafontaine-Torres & Alexis R. González-Pagani 149 25 Scotland Brodies LLP: Andrew Akintewe & Karen Fountain 160 26 Singapore WongPartnership LLP: Charlotte Sin 167 27 Spain Cases & Lacambra: Miguel Cases & Toni Barios 173 28 Switzerland Lenz & Staehelin: François Rayroux & Patrick Schleiffer 179 29 USA Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates: Heather Cruz & Anna Rips 187 Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720 Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations. WWW.ICLG.COM EDITORIAL Welcome to the fifth edition of The International Comparative Legal Guide to: Alternative Investment Funds. This guide provides corporate counsel and international practitioners with a comprehensive worldwide legal analysis of Alternative Investment Funds laws and regulations. It is divided into two main sections: Four general chapters. These are designed to provide readers with an overview of key issues affecting Alternative Investment Funds, particularly from the perspective of a multi-jurisdictional transaction. Country question and answer chapters. These provide a broad overview of common issues in Alternative Investment Funds laws and regulations in 25 jurisdictions. All chapters are written by leading Alternative Investment Funds lawyers and industry specialists, and we are extremely grateful for their excellent contributions. Special thanks are reserved for the contributing editor Stephen G. Sims of Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates for his invaluable assistance. Global Legal Group hopes that you find this guide practical and interesting. The International Comparative Legal Guide series is also available online at www.iclg.com. Alan Falach LL.M. Group Consulting Editor Global Legal Group [email protected] Chapter 1 How External Forces Will Shape Fund Terms Stephen G. Sims Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates Greg Norman The importance of world events in shaping political and economic also to think about making more structural changes to the ways in policies around the globe has, at least in peacetime, rarely been which they operate. One manager recently established a new fund higher. Brexit, President Trump, the rise of protectionism and to buy approximately €750m of assets then held in its existing fund, nationalism, the economic response to the global financial crisis and gave existing investors the ability to exit, or re-invest in the of 2008, sanctions, technological innovation, international co- new fund. In theory, this structure has something for everyone. operation on tax policies and targeting tax avoidance and evasion – Investors seeking cash can exit; investors seeking revenue streams to name but a few – have the ability to shape our futures. On a more can re-invest; and for the manager it can be possible to realise granular level, they may also bring about significant changes to performance fees in the old vehicle. The structure also potentially fund terms as managers and investors seek to respond to the unusual offers continuing investors a lower combination of management and challenges and upheavals to which these events give rise. performance fees for managing the now established assets acquired It seems clear that many Western voters blame free trade, and open by the new fund in order to match the fees to the risk profile of the borders, for the woes that they suffer. This is despite much research assets. In the example mentioned, the transaction was underwritten which suggests that the rise in technology is likely to be more to by a leading secondaries investor. blame. An increase in protectionism, and less open borders, seem the Other possibilities include exiting by way of an IPO (initial public likely result. As countries take sides on the regional disputes around offering), although while this sounds attractive in principle, the world, it is also possible that they will impose stricter ownership depending on the market it may only be possible to sell a significant and control limitations on investors who are from countries which majority stake and be locked in for a period after the offering, with are seen to be on the wrong side of the given dispute. the result that the IPO only offers a partial exit for the existing fund. This will lead to increased scrutiny of fund investors by both Addressing the issues on the way in, rather than on exit, a number of managers and regulators, particularly for those managers targeting firms have already begun raising longer-life funds in order to avoid investments in strategic sectors such as defence, telecoms and missing out on these sorts of opportunities. infrastructure. The presence of an investor who might cause the Of course, protectionism is not new. Many saw the European fund to require regulatory clearance prior to purchasing an asset is Union’s Alternative Investment Fund Managers Directive (AIFMD) likely to lead to sellers favouring other buyers who do not have that as being about protecting the EU’s fund managers from competition issue, or to managers seeking or strengthening rights to exclude as much as it was intended to protect the EU’s institutional investors investors from participating in certain investments, or to lessen from repeats of Madoff, Lehman Brothers, and the various banking their economic or voting rights in relation to certain portfolio scandals. investments. Managers offering co-investment opportunities may AIFMD, which introduced separate regimes for EU and non- also seek to differentiate between investors in terms of priority EU funds, gave EU funds an advantage by allowing them to be based on their actual or perceived acceptability to sellers and marketed throughout the EU with a single regulatory passport, while regulators. at the same time making it increasingly difficult for managers of The era of seemingly permanent low interest rates after the financial non-EU funds to market them in the EU, in particular in certain crisis has led to an increase in the relative attractiveness of private more restrictive jurisdictions. The upshot of this was to make equity as returns from other asset classes have lessened.
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