Investment funds are the driving force behind much global private economic development, and yet the world of investment funds can be complex and confusing.

Funds: Private Equity, Hedge and All Core Structures is a practical introductory guide to the legal and commercial context in which funds are raised and invest their money, with examinations of the tax and regulatory background, and an analysis of the key themes and trends that the funds industry face following the financial crisis. The book looks at asset classes, investor return models, the commercial and legal pressures driving different structures and key global jurisdictions for both fund establishment and making investments. It also contains a comprehensive analysis of fund managers, from remuneration, best practice through to regulation.

The book is written for readers from all backgrounds, from students or newcomers to the industry to experienced investors looking to branch out into alternative asset classes, or existing asset managers and their advisers wanting to know more about the structures elsewhere within the industry.

Autorentext

About the author

Matthew Hudson is an entrepreneurial lawyer with over 25 years of Private Equity experience, both as a lawyer and as an investor. Matthew is a well-known industry figure and regularly speaks on new developments concerning the Private Equity industry. Matthew has helped build and manage four of the major Private Equity law firms:

• Founder of MJ Hudson
• Co-founded the Private Equity Group of SJ Berwin
• Re-established the O'Melveny & Myers London office, and chaired the European Private Equity and M&A Practices

• Created the Proskauer Rose, London office Further, Matthew has also worked in three Private Equity houses:

• Leveraged buy-outs for a group built within CSFB
• Founded Far Blue Ventures, the Venture Capital house, backing IP spin-outs from universities

• Coller Capital, the global Secondaries firm

  Inhalt

  1 Introduction to Funds 1 1.1 Why this book? 1

  1.2 Alternative assets 1

  1.3 What is a fund? 2

  1.4 Categories of funds 3

  1.4.1 Ways to categorize 3

  1.5 Choosing a vehicle 5

  1.6 Open-ended and closed-ended fund structures 6

  1.6.1 Introduction 6

  1.6.2 Impact of the credit crisis 7

  1.7 Contents of this book 8

  2 Limited Partnerships - Use in Alternative Asset Funds 9

  2.1 Introduction to limited partnerships 9

  2.1.1 Suitability of limited partnerships for alternative asset funds 9

  2.1.2 Benefits of limited partnerships 9

  2.1.3 Types of limited partnerships 9

  2.2 Structure of limited partnership funds 9

  2.2.1 Role of general and limited partners 9

  2.2.2 Management and operation of the partnership 10

  2.2.3 Remuneration 11

  2.2.4 UK limited partnerships 11

  2.2.5 US limited partnerships 13

  2.2.6 Parallel funds 15

  2.2.7 Master/feeders 17

  2.3 Establishment of the fund 18

  2.3.1 Process 18

  2.3.2 Documentation 19

  2.4 Investing 20

  2.4.1 Investment objective and returns 20

  2.4.2 Investment strategy 20

  2.4.3 Investment period 20

  2.4.4 Term 21

  2.4.5 Fund borrowing 21

  2.4.6 Investment restrictions 21

  2.5 Commitments by investors 22

  2.5.1 Commitments/drawdowns 22

  2.5.2 Recycling 22

  2.5.3 Default 23

  2.5.4 Management team's commitment 24

  2.5.5 Closings/equalization 24

  2.5.6 Investor clawback 25

  2.5.7 Withdrawals 25

  2.5.8 Transfers 25

  2.6 Economics 26

  2.6.1 Management fee/priority profit share 26

  2.6.2 Distributions/carried interest 26

  2.6.3 Carried interest, escrow and clawback 29

  2.6.4 Carried interest structure 30

  2.6.5 Expenses 30

  2.6.6 Transactional or monitoring fees 30

  2.7 Governance 31

  2.7.1 Removal of the general partner/manager 31

  2.7.2 Key person 32

  2.7.3 Advisory committee 33

  2.7.4 Reports and meetings 33

  2.8 Some conclusions 33

  3 Hedge Funds 35

  3.1 Introduction 35

  3.2 Types of hedge fund strategies 35

  3.2.1 Market neutral or directional 35

  3.2.2 Discretionary or systematic 35

  3.2.3 Strategy implementation and instruments 36

  3.2.4 Typical strategies 36

  3.3 Where are hedge funds located and what are the tax drivers? 39

  3.3.1 Cayman Islands 39

  3.3.2 British Virgin Islands 40

  3.3.3 Jersey 41

  3.4 Hedge fund investors 42

  3.4.1 Seed and cornerstone investors 42

  3.4.2 Incubator funds 42

  3.4.3 Fund of funds 42

  3.4.4 Individual investors and family offices 43

  3.4.5 Platforms 43

  3.5 Principal vehicles 43

  3.5.1 The fund vehicle 43

  3.5.2 Offshore management vehicle 43

  3.5.3 Onshore advisory entity 44

  3.6 Types of hedge fund structures 44

  3.6.1 Simple hedge fund 44

  3.6.2 The master/feeder structure 45

  3.6.3 EU UCITS-compliant funds 47

  3.7 Establishment of the fund 50

  3.7.1 Process 50

  3.7.2 Documentation 51

  3.8 Management and performance fees 52

  3.8.1 Management fee 52

  3.8.2 Performance fee 52

  3.8.3 Hurdle rate 52

  3.8.4 High water mark 53

  3.8.5 Redemption fees 53

  3.9 Other key terms 53

  3.9.1 Liquidity 53

  3.9.2 Lock-ups 53

  3.9.3 Gating provisions 54

  3.9.4 Capacity 54

  3.9.5 Early stage or seed investors 54

  3.9.6 Key man 54

  3.9.7 Equalization 54

  3.10 The use of side pockets 55

  3.11 Regulation 55

  3.12 Some conclusions 56

  4 Structural Variants and Alternative Structures to Chapters 2 and 3 57

  4.1 Introduction 57

  4.2 Pledge funds 57

  4.3 'Combo' fund structure 58

  4.3.1 Introduction 58

  4.3.2 The blind-pool or committed capital fund 58

  4.3.3 The pledge fund 58

  4.3.4 The combined (or 'combo') fund 59

  4.4 Investment clubs 60

  4.5 Fund-lites 60

  4.5.1 Introduction 60

  4.5.2 Shorter life of the fund 61

  4.5.3 Reduced scope of the investment objective 61

  4.5.4 Fees 61

  4.5.5 No key man clause 61

  4.5.6 No escrow or clawback for carry 61

  4.5.7 No re-investment of realized funds 62

  4.5.8 No restrictions on future funds 62

  4.5.9 Fund-lites: some conclusions 62

  4.6 Top-up, bridge and side pockets 63

  4.7 Managed accounts 63

  4.7.1 Introduction 63

  4.7.2 Comparison with funds 64

  4.7.3 Advantages 65

  4.7.4 Disadvantages 65

  4.7.5 Some conclusions 66

  4.8 Corporate vehicles 66

  4.9 Special purpose acquisition companies (SPACs) or cash shells 67

  4.10 UK enterprise investment scheme 68

  4.10.1 Introduction 68

  4.10.2 Legislation 68

  4.10.3 Conditions 69

  4.10.4 EIS funds 71

  4.10.5 Tax 71

  4.11 UK unit trusts 72

  4.11.1 Introduction 72

  4.11.2 Legislation 72

  4.11.3 Authorized unit trusts 72

  4.11.4 Undertakings for collective investment in transferable securities 73

  4.11.5 Pricing 74

  4.11.6 Risk 74

  4.11.7 Fees 74

  4.11.8 Taxation of unit trusts 74

  4.12 Offshore alternatives 76

  4.12.1 Unit trusts 76

  4.12.2 Cell companies 76

  4.13 Jersey property unit trusts 76

  4.13.1 Introduction 76

  4.13.2 Jersey FS law 77

  4.13.3 Types of JPUT 77

  4.13.4 Some JPUT conclusions 78

  4.14 Some conclusions 79

  5 Investment-specific Strategies 81

  5.1 Introduction 81

  5.2 Private equity/venture capital 81

  5.2.1 Introduction 81

  5.2.2 Strategies 81

  5.3 Public equities 82

  5.3.1 Introduction 82

  5.3.2 Strategies 82

  5.4 Bonds 83

  5.5 Credit funds 83

  5.5.1 Introduction 83

  5.5.2 Senior debt 83

  5.5.3 Mezzanine debt 84

  5.5.4 Bonds 85

  5.5.5 Asset-backed securities (ABSs), collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs) 85

  5.5.6 Fund diversity 85

  5.6 Shadow banking 86

  5.6.1 Introduction 86

  5.6.2 SIVs/conduits 86

  5.6.3 Perceived risks 87

  5.6.4 Proposed added US regulation 88

  5.7 Real estate and infrastructure 89

  5.7.1 Introduction 89

  5.7.2 Real estate strategies 89

  5.7.3 Infrastructure strategies 90

  5.8 Energy funds 91

  5.8.1 Old energy 91

  5.8.2 New energy 91

  5.9 Commodities funds 92

  5.9.1 Introduction 92

  5.9.2 Agriculture 92

  5.9.3 Metals 92

  5.9.4 Energy 93

  5.9.5 Direct or indirect investment 93

  5.9.6 Regulation 94

  5.10 Social impact funds 95

  5.10.1 …