When you select a fund location, it has lasting regulatory and tax implications for your fund’s lifespan. This decision requires careful evaluation of variables such as fund case law, tax treatment, investment strategy and investment focus.
As part of that selection process, fund managers should consider the preferences and location of the fund’s seed and target investors. Although dedicated fund vehicles in domiciles like Luxembourg, Ireland and the Cayman Islands have wide appeal for both investors and fund managers, it takes effort to determine which one is the best fit for your fund.
To gain a thorough understanding of available options, fund managers should consider these factors and guiding questions when choosing a fund domicile:
Flexibility
Question to consider: How well can the fund vehicle serve the fund’s investment strategy and target investors?
As your fund’s priorities evolve over time, you may want ample flexibility to meet investment objectives and address liquidity expectations.
Limited Liability
Question to consider: Who is liable for the fund — and what protection does that include?
Typically, fund vehicles limit the extent of investors’ economic loss to the amount they have invested in the fund. This protects investors by keeping their personal assets off-limits.
Tax Efficiency
Question to consider: Is this tax-efficient for the fund, investors and fund manager?
There is no simple formula here. Investment managers will need to consider a range of factors, such as where investors are based and where the management company is domiciled.
Regulation
Question to consider: What type of regulatory regime will the fund operate under — and how will it impact the overall burden of compliance?
Keep in mind that there can be differences in regulatory regimes that apply to certain fund vehicles even within the same jurisdiction.
Fund Structure
Question to consider: Which fund structure is the best fit for both the investors and the fund strategy?
This includes deciding whether you want to focus on reducing costs and complexity — or if you plan to open your fund to both U.S. and non-U.S. investors, along with the accompanying tax, regulatory, and reporting complexities.
Expand Your Reach With Our Market Entry Service
When navigating jurisdictional options, it helps to have a trusted partner who understands the complexities of the evaluation process. That’s why clients rely on SFS to help them explore new markets efficiently.
With our Market Entry Service, we support our clients by positioning them for long-term success. The guidance we offer includes:
Conducting exploratory conversations with our clients to set expectations, define objectives and discuss steps to be taken.
Coordinating discussions with relevant market players to get a feel for the market and respective opportunities.
Setting up meetings with relevant and trusted capital sources to seek client-specific feedback.
Defining a market entry approach based on exploratory conversations — including timelines, regulatory and structuring requirements, and a marketing distribution approach.
Our global team consults with investment managers on new fund launches and firm expansion. Learn more about Swiss Financial Services Market Entry Services by reaching out to a member of our team.