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. 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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 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