Jurisdictional jostling

A simplified UK limited partnership structure launched in April, aiming to reduce the costs and administrative burden of operating a private equity fund.

The Private Fund Limited Partnership goes a long way towards putting UK limited partnerships on a similar footing to other common fund structures.

Changes include the inclusion of a ‘white list’ of activities a limited partner may undertake without jeopardizing its limited liability status, and the abolition of the obligation to publish a gazette notice when an LP transfers its interest.

Its introduction couldn’t come at a better time; law firm sources told pfm managers have been actively considering other EU fund structures as a result of the Brexit vote, which could mean the UK leaves the single market and loses the right to market freely to investors within the EU. But while the new structure brings the UK’s offering closer to some European peers, competition from other jurisdictions remains strong.

Luxembourg is in the EU and offers political, legal, regulatory and fiscal stability. The country offers a range of private equity fund structures that accommodate any set of tax and governance requirements – from an investor and initiator perspective. Among these is the Reserved Alternative Investment Fund, which can be launched more quickly than other funds as it does not need approval from the regulator.

Jersey has introduced a range of new products designed to enable it to compete with other jurisdictions. The Jersey Private Fund has a 48-hour authorization process, making it a faster alternative to the PFLP. The jurisdiction was selected by SoftBank to host its record-breaking $100 billion fund.

Ireland has the best regulatory conditions, legal and tax framework and business conditions of European countries, according to global fund managers surveyed by law firm Matheson. In total, 67 percent said they would domicile in the country if they were starting afresh. Its most popular structure is the Qualifying Investor Alternative Investment Fund, which can be adapted to fund managers’ needs.

Guernsey was one of the first countries to be recommended by the European regulator for an AIFMD passport due to its robust regulatory regime. Its anti-money laundering regime is ranked first in the world by Moneyval, the Council of Europe’s monitoring body. It has launched two new fund structures in the past six months; the first does not require regulatory approval and the second, the Private Investment Fund, has a one-day registration process, making it the quickest fund to bring to market.

The PFLP only launched in early April, so it is still early to gauge the level of interest from managers.

“Given the administrative improvements made and the increased clarity offered to LPs in respect of their involvement in the management of the partnership’s business, it seems highly likely that the PFLP will be well received and widely adopted instead of the prior UK limited partnership offering going forward,” Shervin Shameli, partner at MJ Hudson, tells pfm.

Whether the PLFP will sway undecided firms in the Brexit era is another matter, especially given the efforts other countries are making to entice fund managers.