INTRODUCTION Contributed by: Elizabeth Shea Fries, Sidley Austin LLP
seeking to enforce principles through litigation and enforcement actions, but are also looking for alterna - tive means of providing guidance to managers and funds (through no-action letters, interpretations and exemptive relief). Numerous other regulatory issues affect managers and funds, including: • review of merger transactions by the US Federal Trade Commission and the US Department of Jus - tice as well as non-US antitrust agencies; • increasingly stringent anti-money laundering and ‘know your customer’ requirements; • the Committee on Foreign Investment in the United States and foreign direct investment requirements; and • beneficial ownership reporting under Sections 13(d) and 13(g) of the US Securities Exchange Act of 1934, as amended. Furthermore, numerous other global regulations that are pending or have recently been adopted are increasing the regulatory and compliance obligations for alternative investment funds and their managers. Where to organise/operate? In this environment, the selection of a jurisdiction in which to organise and operate a manager and its funds is increasingly important. This Practice Guide is designed to give an overview of various jurisdictions and provide a broad overview of key considerations. At the highest level, a prospective fund manager will want to consider both the investment strategy and expected jurisdiction of portfolio investments, and
the location and type of prospective investors. Cer - tain strategies, such as private credit, entail significant tax considerations, and careful planning is essential. Increasingly, the regulatory regimes in which a manger and its funds operate and invest generate compliance costs and restrictions requiring detailed legal analysis. Carefully tailoring jurisdictional choices to the needs of the business and investors, rather than relying exclu - sively on past practice or trends, is essential to build - ing a successful alternative investments business. GP stakes and other transactions or partnerships This environment has proven rewarding for larger and more established managers (and well-credentialled new managers/spin-outs). Accordingly, the industry is seeing more consolidations and acquisitions of man - agers, with banks and other traditional asset manag - ers acquiring teams and capabilities, including on a cross-border basis. There is also increased activity in the global “GP stakes” markets, where managers can sell a portion of the firm and general partner (hence the term “GP stakes”) and raise additional capital for new initiatives, secure anchor investments for their funds/strategies or facilitate a generational transition of the firm. In some cases, a GP stakes or other third- party investor can also provide strategic guidance or access to new channels for distribution or investing. Strategic partnerships are emerging as a new strategy to couple alternative investing strategies with retail or high net worth distribution capabilities, and more tra - ditional portfolios. These transactions require careful structuring and negotiation but can offer opportunities for alternative fund managers seeking to plan for the future in an increasingly competitive and fast-moving environment.
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