As bespoke regulatory hosting and European AIFM plaform, XCAP and our regulated investment partners specialise in Alternative Investments Funds (AIFs) structures, which can be 'Opened' or 'Closed' funds. Most of our funds that we structure and host are 'Closed' funds, specialising in Private Equity and Venture Capital, however we work with a host of Fund Managers who operate 'Open' funds.
The most common types of fund structure that we assist with are:
- Alternative Investment Funds - AIFs can be 'Opened' or 'Closed Funds' depending on your funds' activities.
AIF fund structures are often called different names in different jurisdictions. For example, in Luxembourg you have SICAV, RAIFs, SIF etc - all of these fund structures are ultimately deemed to be 'AIFs'. AIFs are largely unregulated collective investment schemes, where the investment manager (the AIFM) is the regulated entity. Ordinary Retail investors cannot invest AIFs; hence they are structured and designed for institutional, professional and HNW investors.
- UK Limited Companies/LLPs - Particularly useful for Real Estate Private Equity funds, Private Equity/Venture Capital and Special Situation funds.
Over the last 10 years, UK limited companies and LLPs have become very popular in the EU to operate as a fund real estate private equity, where the legal charge of the properties are held within the company and investors would be granted shares in the limited company. (This was superseded by 'Private Fund Limited Partnership', in March 2017, see below). In these instances, the limited company will require a European AIFM in order to act as investment manager, carry out on-boarding, due-diligence and promote the fund to new investors. The investors of the fund are not permitted to be involved in the day to day running of the UK limited, nor would they have voting rights.
UK limited companies are also particularly common amongst Private Equity and Venture Capital funds in the same way that target companies are purchased by the UK limited company and it's shares held in the limited company. This, again allows the investors (often referred to as Limited Partners in the PE sector) to receive shares in the UK limited company which holds the assets. A number of PE fund managers prefer this model for PE acquisitions, as it is competitively priced to set up and offers greater transparency to investors and is 'onshore'.
- UK Private Fund Limited Partnerships (PFLP) - A new Collective Investment Scheme introduced in March 2017, to supersede the traditional UK LLPs, giving investors greater flexibility.
The introduction of the PFLP was designed to update the traditional English limited partnership (LLP) regime. More importantly, under the PFLP, there is now a list of 'Permitted Actions' that limited partners will be able to take without compromising their limited liability status. This was found to be particularly welcomed in providing both investors and sponsors with comfort that participation in the limited partnership risk committee will not result in investors risking their limited liability. There are also notable changes in the requirements of limited partners not having to make capital contributions to the PFLP.
Which Fund Structure Is Right For Me?
The answer to this question largely depends on the factors outlined below, which we would take into account, whilst working with you in reaching a conclusion:
- The funds activities;
- Investment mandate and asset classes invested in;
- Jurisdiction of the fund;
- Size of capital raising;
- Regulatory permissions of the Investment Manager.