Non-EU GPs marketing feeder funds in the UK do not have to report on a “look-through” basis and provide details about the master fund, according to guidance recently issued by the UK’s securities watchdog the Financial Conduct Authority (FCA).
Master-feeder structures pool capital raised by overseas investors into one central vehicle called the master fund, with separate vehicles (or feeders) created for each investor group. Investors invest in the feeder funds, which in turn invest their assets in the master fund. The master fund makes all the portfolio investments and conducts trading activity, while management and performance fees are payable at the feeder fund level.
GPs marketing their feeder funds in the UK will still be required to file a transparency report, known as Annex IV, but only on the feeder fund and not at the master fund level.
The Annex IV reports are required by any fund manager marketing in Europe as mandated by the pan-European marketing regulation the Alternative Investment Fund Managers Directive.
“This report is much easier to complete than the master fund report, since the feeder's sole asset is the master fund and there is no look-through to the portfolio,” said a client alert from law firm Seward & Kissel. “This dramatically reduces the complexity, cost and compliance burden required of non-EU fund managers in relation to marketing under the UK's private placement regime.”