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Hfcf alternative investment fund one world capital group forex

Hfcf alternative investment fund

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The unit trust structure is preferred for most AIF structures, although limited partnerships are often used for venture capital or private equity strategies. Listed investment vehicles such as LICs and listed trusts have become somewhat more popular over the last few years although the tax position of listed investment companies needs to be carefully managed. The form, structure and regulatory requirements for an AIF will depend on whether it is registered as a managed investment scheme will generally not be available to retail investors if it is not registered.

In the case of an unregistered fund, there are no specific requirements for a local administrator or other service provider. In the case of a registered fund, there is no requirement for a local administrator; although it is common for the trustee referred to as a responsible entity of the fund to appoint a local administrator to handle matters such as application and withdrawal processing, accounting, some aspects of tax management, maintenance of registers and other services typically provided by an administrator.

In order to hold custody of the assets of an Australian investment fund, the custodian must hold an Australian financial services licence and must meet the regulatory capital net asset backing requirements imposed by the Australian Securities and Investments Commission. It is not common for an alternative investment fund established and domiciled outside Australia to redomicile in Australia.

This is because, if the fund is a registered fund, it will need to have a constitution which meets Australian legal and regulatory requirements. In the case of an unregistered fund, there may be reasons to redomicile in Australia although this is less common.

An unregistered fund namely one which is available only to wholesale clients need not be authorised or licensed itself in Australia. A venture capital or private equity fund structured as a limited partnership must be registered with Innovation Australia.

The entity managing, marketing or distributing a fund, however, must be licensed ie, hold an Australian financial services licence AFSL or have the benefit of a particular exemption. An alternative investment fund AIF that is registered or required to be registered it must be registered if it is to be offered to retail clients must have a constitution and an approved trustee known as a responsible entity and which has an AFSL with a responsible entity authorisation.

Any entity managing, marketing or distributing the fund must be licensed ie, hold an AFSL or have the benefit of a particular exemption. Once an acceptable constitution is lodged with ASIC, registration must be effected within 14 days; although the process leading up to preparing a complying constitution can, of course, take some time. The structure of an alternative investment fund AIF in Australia will usually include an entity that will act as the trustee or responsible entity, in the case of a registered fund , which in turn will appoint a fund manager whether a third-party manager or an adviser or affiliate of the trustee to manage the fund and the assets of the fund.

If the trustee of an AIF is an affiliate of the fund manager, the trustee is often formed specifically for the purpose of acting as trustee of that fund. Other appointed service providers can include administrators and custodians.

The primary advantage is that investors understand these structures and the roles of the parties, including the clear separation of functions. A possible disadvantage is the marginal extra cost of an additional party. AIF managers must be authorised or licensed to market and distribute the fund or manage the assets of the fund, or must have the benefit of a particular exemption. Traditionally, AFSL exemptions were available, on application, to regulated entities in a few recognised foreign jurisdictions which the Australian Securities and Investments Commission ASIC regards as having equivalent regulation and supervision as in Australia.

For example, an investment adviser regulated by the Securities and Exchange Commission in the United States or by the Financial Conduct Authority in the United Kingdom would typically be entitled to such an exemption upon application. The application must include evidence of compliance and governance arrangements supporting compliance with financial services laws and the policies of regulators including ASIC , including financial regulatory capital, conflict management, risk management and other measures.

The applicant must put forward submissions demonstrating organisational competency, and include detailed background information of several nominated responsible managers and criminal and credit checks and references. The foreign AFSL regime mirrors the existing AFSL regime, subject to the relaxation of a number of regulations where the foreign financial services provider is otherwise regulated under a sufficiently equivalent foreign regulatory regime. The foreign AFSL regime was introduced on 1 April and is intended to replace the passport regime currently relied on by foreign financial services providers from a number of jurisdictions with regulatory regimes that are viewed as sufficiently equivalent to the Australian regime.

Under prior law, foreign financial services providers that are regulated by their equivalent securities regulator in the United States, the United Kingdom, Hong Kong, Singapore or Germany may upon application access relief from the need to hold an AFSL to provide financial services to wholesale clients in Australia.

The process is to complete an online application and lodge the documents and proofs requested. Three months to six months is the typical timeframe. The main restrictions and requirements applicable to AIF managers and advisers in Australia are the licensing requirements.

If an AIF is not registered, there is no limit on the restrictions that can be included in the fund constitution regarding the issue, redemption or transfer of interests in the fund, subject to adequate disclosure. The same generally applies if an AIF is registered, except that there are requirements regarding the timing and apportionment of redemption payments if the fund is illiquid and in relation to the suspension of redemptions in the case of a liquid fund.

A change in control of a licensed entity will also trigger an ASIC review. As the holder of an AFSL, an AIF manager is generally entitled to provide investment management services to wholesale clients, including under a segregated mandate agreement with an institutional investor client. There are no specific requirements relating to the ability of an investment manager to delegate to third-party managers and advisers, provided that those parties are appropriately licensed and authorised.

An investment manager which is appropriately licensed and authorised under an AFSL can provide investment management services to clients other than AIFs, subject to appropriate governance and competency. The regulatory requirements apply regardless of whether the fund is marketed to wholesale clients or retail clients.

The entity marketing a fund must be licensed ie, hold an Australian financial services licence AFSL or have the benefit of a particular exemption. A licence can be limited — for example, by allowing the entity to engage in dealing and advice activities typically, marketing would cover either or both of these to wholesale investors only.

Although an AFSL may include authorisations that allow the holder to market funds to retail clients, the particular funds must first be registered in order to be offered to retail clients. The procedures for obtaining an AFSL differ according to whether the entity is an Australian incorporated and domiciled entity or whether it is a foreign investment adviser regulated by an approved foreign jurisdiction such as the US Securities and Exchange Commission or the Financial Conduct Authority.

Alternative investment funds AIFs can be marketed to both wholesale clients and retail clients. If marketed to retail clients, the fund must be registered, and will be regulated, as a registered scheme and require a product disclosure statement. Depending on the type of AIF, the Australian Securities and Investments Commission ASIC has new powers under which it may deem the marketing of an investment in such a fund to retail clients as inappropriate and exercise its intervention powers.

These rules apply for all kinds of funds, whether alternative or not; but in the case of AIFs, they will be more closely scrutinised especially if offered to retail clients , to ensure that investors are not given information that is misleading or deceptive whether by inclusion or omission. Offers to wholesale clients do not require a product disclosure statement, but will usually be made in the same way as they are made in many other jurisdictions — namely, using an information memorandum or private placement memorandum , which is a private offering document and does not have prescribed content.

Wholesale clients comprise certain institutional, sophisticated and professional investors that meet relevant criteria prescribed by the Corporations Act It is anticipated that ASIC will in due course tighten up aspects of the wholesale client definition. Fund managers from outside Australia cannot actively market their fund in Australia unless they hold an AFSL or operate under an exemption. A new regime will be in place from 1 April for foreign fund managers to apply for a foreign AFSL as noted in question 4.

Local marketing entities that hold an AFSL will be the only entities permitted to promote and distribute the fund and engage with clients and investors unless the foreign fund manager or fund promotor holds an AFSL or a foreign AFSL, or benefits from other exemption. Foreign AIFs can typically be offered to wholesale clients in Australia without much restriction subject to the licensing rules and the regulation of marketing activities and market conduct rules.

In practice, foreign AIFs are rarely offered directly to retail clients in Australia, as there are many layers of regulation which apply to retail offerings, including stricter Australian licensing requirements and the need for the fund to be registered with ASIC. ASIC has recently been provided with additional product intervention powers, which are aimed at regulating some product architecture. Additional design and distribution regulations will take effect in early and will require financial product issuers and distributors to have a customer-centric approach to designing, marketing and distributing financial products to retail customers.

This will enable ASIC to prevent the offering of certain types of funds to retail investors where those funds are not suitable for retail investors which could arise in the case of a complex investment fund that has limited withdrawal rights. The issuer and distributor will be required to identify the target market by making a target market determination for that product, and ensure that the product is distributed only to that market segment. No specified investment or borrowing restrictions apply to the portfolios of alternative investment funds AIFs , subject to limited exceptions.

If the fund is offered to retail clients with short-term withdrawal rights, then as a matter of structure, the fund must invest in assets which will enable that liquidity obligation to be met. Specific provisions in the Corporations Act deal with the difference between liquid and illiquid funds and the types of liquid investments which would be required to satisfy withdrawal requests.

Venture capital or private equity vehicles formed as venture capital limited partnerships or early stage venture capital limited partnerships must invest only in certain eligible venture capital investments which excludes certain sectors, such as companies involved in the provision of finance, real estate or infrastructure; although it can include certain start-up fintech businesses.

As alternative investment funds AIFs are usually offered only to wholesale non -etail clients, the key disclosure document is the information memorandum, however named, which must not contain information that is misleading or deceptive whether by inclusion or omission. Reporting, governance and risk management requirements differ according to whether the fund is registered or unregistered.

For unregistered funds, this will depend largely on what is promised in the information memorandum. If the fund is offered to retail clients and is therefore registered, the trustee responsible entity must be appropriately authorised and a compliance committee must be established for the fund unless more than half of the directors of the responsible entity are independent directors.

If the fund is unregistered as is typically the case with AIFs that are offered to wholesale clients only , it will not be subject to any legislative reporting, governance or risk management requirements; but the licence-holding trustee or manager will be subject to legislative risk management requirements, including in relation to conflicts of interest and risk management processes. Funds that are offered to retail investors and use an absolute return, hedge, infrastructure, mortgage or direct real estate investment strategy must report to investors annually based on a set of disclosure principles and benchmarks.

This structure became very common for investment in infrastructure such as toll roads, seaports and energy utilities. Although there has been long-standing use of these types of stapled structures, the Australian government recently enacted measures to limit the benefits of stapled structures —albeit with a transitional period of continuing favourable treatment for certain eligible arrangements.

At the same time, steps were taken to codify, and to an extent pare back, access to concessional tax treatment through flow-through trusts for foreign pension funds and sovereign entities. There are special rules for eligible domestic investment trusts that are widely held, known as managed investment trusts MITs. Unit trusts that are eligible to meet the criteria for MIT status may attract a concessional tax profile for non-resident investors, including potentially :.

Additionally, MITs can elect for capital account treatment of gains on the realisation of eligible investments subject to various exceptions, including land held as trading stock, debt interests and certain financial arrangements , which may be advantageous to both Australian and foreign resident investors.

For example, non-resident investors are subject to withholding tax under the capital account election only in relation to gains from the disposal of an interest held directly, or in some cases, indirectly by the MIT in real property situated in Australia defined broadly. Australian resident individuals and superannuation funds, on the other hand, can access discounted capital gains tax treatment where the relevant investment was held by the MIT for at least 12 months.

Unit trusts may be operated in any manner as determined in the trust deed adopted by the trustee, which may, for example, provide for operation as either an evergreen or closed-end fund. It also allows the trusts to correct errors or delays in finally ascertaining trust income by making adjustments in the year the need for correction is discovered, rather than having to reopen prior year distributions and tax filings. Some controversy has arisen as to how these rules apply to investments by foreign limited partnerships which are eligible for flow-through treatment in the home jurisdictions of the investing partners eg, the United States and hence arguably entitled to flow-through tax treatment under Australian tax treaties with those jurisdictions.

Litigation in the federal courts has not yet finally resolved the issue, but has apparently concluded that the limited partnership itself cannot claim the benefit of the treaty protections for transparent vehicles Commissioner of Taxation v Resource Capital Fund IV LP [] FCAFC Limited partnerships are generally treated under Australian tax law as companies — that is, they are taxed at the company tax rate and do not offer flow-through tax treatment.

However, exceptions to this general rule apply to limited partnerships that are registered with the Australian government to engage in eligible venture capital investment activities. These types of limited partnerships can be used for certain venture capital and certain private equity investment strategies. Each of these may be eligible for certain capital gains tax concessions on qualifying investment activities.

For example, eligible foreign investors will generally not be subject to Australian tax on realised capital gains by VCLPs on eligible venture capital investments held for at least 12 months. Early stage investor tax concessions may also be available to start-up fintech businesses for investments made after 1 July Australian investment fund managers and advisers are generally treated in the same way as regular taxpayers.

In general, income and other rewards for management or advisory services will be taxed as ordinary income; there is a capital gains tax treatment for carried interests in venture capital partnerships in certain cases. Foreign investment fund managers and advisers are generally exempt from Australian taxation, provided that they do not have a permanent establishment in Australia; but in some cases they may be taxed on Australian-sourced fee income — for example, if operating through a dependent agent in Australia.

Distributions of carried interests from a MIT may in some cases be deemed to be Australian-sourced income. Foreign investment funds using Australian-based managers, advisers or agents need to be careful not to establish a taxable Australian presence. In , the tax laws were amended to introduce the investment manager regime IMR , to enable an IMR-compliant foreign fund to retain its non-resident tax status for qualifying portfolio investments if its Australian presence is limited to using an eligible independent Australian fund manager.

The IMR also confirms that qualifying portfolio investments will not be subject to Australian income tax where they are held by eligible widely held foreign funds that do not have an Australian manager and do not otherwise have a permanent establishment or trading business in Australia. There is generally flow-through of tax in funds which are structured as unit trusts so that investors typically share their tax burdens proportionate to their holdings in the funds see question 8.

The unit trust structure is the most commonly used because of its flow-through tax treatment and potential access to concessional tax treatment of distributions to foreign investors. See question 8. The landscape for alternative investment funds AIFs in Australia is promising, especially for the pension industry. The pool of investable capital from Australian superannuation funds comprising both large public offer funds and self-managed superannuation funds is among the largest in the world largely due to the compulsory retirement savings regime introduced in the s.

Superannuation funds are constantly on the lookout for investment opportunities which may provide enhanced returns for their members. Many foreign investment managers and distributors and advisers are generally familiar with the Australian sophisticated and professional investor's style, local investment fund structures and tax issues, and many are therefore comfortable with establishing satellite or feeder funds for Australian investors. Corporate and limited partnership fund structures: In the — budget, as part of the Ten-Year Enterprise Tax Plan, the government announced that it would introduce tax and regulatory frameworks for two new types of collective investment vehicles CIVs : the corporate collective investment vehicle CCIV and the limited partnership CIV.

On 19 January , the Treasury released comprehensive exposure drafts of both the regulatory and tax legislation for the CCIV regime. However, the relevant legislation is still to be enacted at the time of writing. The CCIV regime enables asset management firms to structure an investment fund as a corporation and is designed to be an internationally recognisable investment vehicle that can be marketed to foreign investors. Legislation facilitating more widespread use of a limited partnership structure is also proposed currently, limited partnerships are used only in the private equity and venture capital sectors , and it is hoped will follow closely after finalisation of the CCIV legislation.

The overarching aim of such legislation is to provide a choice of tax-transparent structures unit trusts, corporations or limited partnerships , but with equivalent governance features. For companies located in Luxembourg City, the aggregate corporate income tax and municipal business tax rate ranges from The net wealth tax rate is 0. Luxembourg managers and advisers structured as a SOPARFI under the legal form of a tax-opaque entity ie, a joint stock company, private limited company or corporate partnership limited by shares are subject to corporate income tax, municipal business tax and net wealth tax at the standard rates as described in question 8.

Individual managers and advisers that are Luxembourg tax residents are subject to Luxembourg personal income tax on their worldwide income subject to tax treaty provisions. The Luxembourg income tax liability is based on the individual's personal situation and takes into consideration various personal tax allowances and deductions. Management and advisory fees qualify as income from independent activities.

The Luxembourg personal income tax is calculated in accordance with a progressive rate ranging from 8. The beneficiaries of the management and advisory fees should also be liable for social security for self-employed persons at a rate of Social security contributions are deductible for personal income tax purposes except for the dependent contribution. Carried interest paid to qualifying employees as an incentive for the AIF's performance can be taxed at the maximum progressive rate of However, qualifying employees can benefit from such tax incentive only for a maximum of 10 years and to the extent that they transferred their tax residence to Luxembourg before 31 December Individuals that are Luxembourg tax residents and that invest in AIFs structured as tax-transparent entities ie, limited partnership or special limited partnership are directly subject to personal income tax under the rules described in question 8.

Luxembourg tax resident individuals investing in SIFs, SICARs, RAIFs and SOPARFIs structured as tax-opaque entities ie, joint stock company, private limited company or corporate partnership limited by shares are subject to personal income tax on income and gain received and realised from these entities under the rules described in question 8.

Investors structured as standard Luxembourg companies eg, SOPARFIs are subject to corporate income tax, municipal business tax and net wealth tax at the standard rates as described in question 8. These two sets of law share similar goals and concepts, as they create specific due diligence and reporting obligations for financial intermediaries based in Luxembourg.

Investment funds are within the scope of these rules, except for certain exemptions provided by IGA Model 1 among others, Luxembourg retirement funds and local banks. Based on these rules, Luxembourg-based investment funds must collect self-certification forms from their investors in order to evidence the tax residence of the individuals who invest directly or indirectly in them.

Furthermore, Luxembourg-based investment funds must report, on an annual basis, the amounts of their interests in the funds, as well as any type of income deriving from the funds for these investors. The international and European tax landscape for AIFs has been significantly reshaped since In Luxembourg, several measures have been implemented to adapt the country tax toolkit in accordance with international and European tax changes. The measures that affect tax strategies for AIFs include:.

Therefore, tax strategies for AIFs have focused on maximising interest deductibility and cash-flow efficiency while reinforcing the substance and beneficial ownership by using, notably, regulated structures with a mix of tax-transparent and tax-opaque vehicles. AIFs investing in real estate could be structured with a RAIF having the legal form of a special limited partnership or a joint stock company with variable capital.

Luxembourg remains the first investment fund centre in Europe and the second in the world. Luxembourg is also a major hub for EU and global asset managers, with the presence of 98 of the largest European asset managers. Unregulated AIFs offer legal structuring flexibility while allowing for timely marketing and launch, without being subject to the prior authorisation or ongoing supervision of the Luxembourg regulator, thus saving time and cost for managers.

With the adoption of a directive and regulation on the cross-border distribution of collective investment funds in summer , a new legal and regulatory framework will harmonise the rules and reduce the barriers and costs for the cross-border distribution of investment funds within the European Union, including Luxembourg. The regulation entered into force on 1 August , while the directive must be transposed into national law by July Pre-marketing will be allowed for EU AIFMs, so that fund managers will be able to test the appetite of potential investors for new investment strategies.

However, pre-marketing activities will be subject to certain requirements - in particular, formal notification of the home regulator. In case of pre-marketing, EU AIFMs will not be allowed to rely on reverse solicitation for 18 months from the beginning of the pre-marketing activity, which will substantially limit the possibility to have recourse to reverse solicitation.

Pre-marketing and marketing activities will be permitted only for certain entities, such as AIFMs, investment firms, credit institutions, undertakings for collective investment in transferable securities management companies and tied agents. New requirements have also been introduced regarding the de-notification of marketing activities. Requirements applicable to regulatory fees and charges will also be aligned across EU member states.

The steady growth of the number of unregulated AIFs, such as the RAIF and limited partnerships, should continue apace in the coming years. There is a clear preference and market demand for a single-tier regulatory model ie, regulation of the AIFM only , instead of a double-tier regulatory model ie, regulation of the AIF and regulation of the AIFM. The ongoing review of the AIFM Directive by the European Securities and Markets Authority may give greater insight into the key topics which will be probably addressed at level 2, via regulations or a full review of the AIFMD, such as the rules on remuneration, the depository rules, the national private placement regimes and the AIFMD third country passport.

Luxembourg offers a wide range of legal structuring tools which may address the requirements and specificities of different projects. Managers targeting a lower level of assets under management with minimum regulatory obligations may consider setting up a non-regulated AIF in the form of a Luxembourg special or common limited partnership and appointing a registered AIFM, thus eliminating the costs and regulatory burden associated with the appointment of an authorised AIFM and depositary.

The special limited partnership is an efficient launch pad, as it is quick to set up and well suited for projects requiring contractual flexibility and cost efficiency. The major drawback is the absence of a marketing passport and the impossibility of setting up an umbrella structure with segregated compartments. Should the targeted level of assets under management exceed the thresholds set out in Article 3 2 of the AIFM Law, it may be worth considering a reserved alternative investment fund, which may be structured as an umbrella fund.

Although an authorised AIFM will have to be appointed, it will make the EU marketing passport available to market the fund to professional investors across the European Union, thus turning costs into additional opportunities. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. All Rights Reserved. Password Passwords are Case Sensitive.

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What powers do they have? The CSSF may impose certain sanctions or administrative measures with respect to AIFMs and AIFs which are subject to its supervision, such as the following: to access documents and request additional information including existing data records and telephone conversations ; to carry out on-site inspections and investigations; to request the cessation of any illegal practice; to request the freezing or sequestration of assets; to temporarily prohibit the exercise of professional activities with respect to persons subject to its prudential supervision; to withdraw the authorisation granted to AIFMs and AIFs subject to its supervision; and to transmit information to the state prosecutor for criminal prosecution.

It may further disclose such penalties to the public. The main types of alternative investment funds AIFs in Luxembourg are as follows: hedge funds; private equity funds; real estate funds; infrastructure funds; debt funds; commodity funds; funds of funds; master-feeder funds; and European long-term investment funds. If yes, what legal protections are in place to protect the alternative investment fund's assets? If yes, what considerations are required and what are the steps involved?

Do any restrictions apply in this regard? Please see questions 2. To this end, the CSSF will require the following documents from each board member: a dated and signed CV; a certified copy of his or her ID or passport; a declaration of honour form; an excerpt from the criminal record s ; and a time allocation assessment form.

Additional information and documents may be requested by the CSSF. They may also, by derogation and under certain conditions, provide the following additional services: management of portfolio of investments, including those owned by pension funds and institutions for provision of occupational retirement in accordance with mandates given by investors on a discretionary, client-by-client basis; and non-core services ie, investment advice, safekeeping and administration regarding shares of UCIs, receipt and transmission of orders in relation to financial instruments, only if the investment management functions are provided.

An AIFM must either be authorised or registered, based on the following criteria. Moreover, an external AIFM may additionally provide: discretionary portfolio management services on a client-by-client basis; and non-core services eg, investment advice as set out in Article 5 4 of the AIFM Law.

If so, please provide details. If yes, please provide details of any specific requirements. No delegation or sub-delegation can be made to the depositary or a delegate of the depositary, or to any entity which may give rise to conflict of interest, unless: the entity has functionally and hierarchically separated the performance of its portfolio or risk management tasks from other potentially conflicting tasks; and the potential conflicts of interest are identified, managed, monitored and disclosed to investors of the AIF.

If yes, do any additional requirements apply? If so, are there specific requirements? AIFs must be subject in their home state to: regulation providing investors guarantees of protection; and supervision at least equivalent to that provided by Luxembourg laws governing AIFs authorised to be marketed to retail investors in Luxembourg; and There must be cooperation between the CSSF and the supervisory authority of the AIF.

This must include, among other things, information on: the investment strategy and policy of the AIF; the types of assets in which the AIF may invest; the techniques it may employ; the use of leverage; information on the identity of the service providers and the AIFM; investors' rights; a description of the delegation by the AIFM and the depositary; the valuation procedure; liquidity risk management; fees and expenses; information on the issue and sale of interests; the net asset value of the AIF; and its performance.

The AIFM must notify the acquisition of control by the AIF: to the non-listed company; to the shareholders; and to the CSSF, together with information regarding the consequences on the voting rights, the conditions subject to which the control was acquired and the date on which control was acquired.

Authorised AIFMs must regularly report to the CSSF on: the principal instruments and markets in which they trade; the principal exposures and most important concentrations; the main categories of assets including percentages subject to special arrangements due to their illiquid nature ; and the risk profile and risk management systems employed. AIFMs must comply with the following minimum requirements: Conduct due diligence when investing on behalf of the AIF in accordance with the investment strategy, objectives and risk profile of the AIF; Ensure identification, measure and monitoring on an ongoing basis including through use of stress testing procedures of the risks associated with each investment position of the AIF and the overall effect on the AIF's portfolio; and Ensure that the risk profile of the AIF corresponds to the size, portfolio, structure and investment strategies and objectives of the AIF, as set out in the constitutive documents of the AIF.

The choice of structure will largely depend on a combination of several factors, including: the investment strategy; the assets; the size of the alternative investment fund AIF ; the profile and location of the investors; the time to market; the level of regulation needed; cost efficiency; and tax considerations.

It is some time since our last bulletin, and it is a very different world. Perhaps one way of encapsulating this year will be Dickens' words: "it was the best of times, it was the worst of times". Unsustainable Risks? Fast forward seven years, and this directive is still evolving, but now with a new focus: sustainability. A lasting power of attorney LPA is a legal document which gives another person of your choice the ability to make decisions on your behalf. Walker Morris.

Shariah-compliant private equity funds are governed by the laws and principles of Islam. The amount of capital managed by these funds continues to increase, partly due to the build-up of savings. Sign Up for our free News Alerts - All the latest articles on your chosen topics condensed into a free bi-weekly email. Register For News Alerts.

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A licence can be limited — for example, by allowing the entity to engage in dealing and advice activities typically, marketing would cover either or both of these to wholesale investors only. Although an AFSL may include authorisations that allow the holder to market funds to retail clients, the particular funds must first be registered in order to be offered to retail clients. The procedures for obtaining an AFSL differ according to whether the entity is an Australian incorporated and domiciled entity or whether it is a foreign investment adviser regulated by an approved foreign jurisdiction such as the US Securities and Exchange Commission or the Financial Conduct Authority.

Alternative investment funds AIFs can be marketed to both wholesale clients and retail clients. If marketed to retail clients, the fund must be registered, and will be regulated, as a registered scheme and require a product disclosure statement. Depending on the type of AIF, the Australian Securities and Investments Commission ASIC has new powers under which it may deem the marketing of an investment in such a fund to retail clients as inappropriate and exercise its intervention powers.

These rules apply for all kinds of funds, whether alternative or not; but in the case of AIFs, they will be more closely scrutinised especially if offered to retail clients , to ensure that investors are not given information that is misleading or deceptive whether by inclusion or omission.

Offers to wholesale clients do not require a product disclosure statement, but will usually be made in the same way as they are made in many other jurisdictions — namely, using an information memorandum or private placement memorandum , which is a private offering document and does not have prescribed content.

Wholesale clients comprise certain institutional, sophisticated and professional investors that meet relevant criteria prescribed by the Corporations Act It is anticipated that ASIC will in due course tighten up aspects of the wholesale client definition. Fund managers from outside Australia cannot actively market their fund in Australia unless they hold an AFSL or operate under an exemption.

A new regime will be in place from 1 April for foreign fund managers to apply for a foreign AFSL as noted in question 4. Local marketing entities that hold an AFSL will be the only entities permitted to promote and distribute the fund and engage with clients and investors unless the foreign fund manager or fund promotor holds an AFSL or a foreign AFSL, or benefits from other exemption.

Foreign AIFs can typically be offered to wholesale clients in Australia without much restriction subject to the licensing rules and the regulation of marketing activities and market conduct rules. In practice, foreign AIFs are rarely offered directly to retail clients in Australia, as there are many layers of regulation which apply to retail offerings, including stricter Australian licensing requirements and the need for the fund to be registered with ASIC.

ASIC has recently been provided with additional product intervention powers, which are aimed at regulating some product architecture. Additional design and distribution regulations will take effect in early and will require financial product issuers and distributors to have a customer-centric approach to designing, marketing and distributing financial products to retail customers. This will enable ASIC to prevent the offering of certain types of funds to retail investors where those funds are not suitable for retail investors which could arise in the case of a complex investment fund that has limited withdrawal rights.

The issuer and distributor will be required to identify the target market by making a target market determination for that product, and ensure that the product is distributed only to that market segment. No specified investment or borrowing restrictions apply to the portfolios of alternative investment funds AIFs , subject to limited exceptions. If the fund is offered to retail clients with short-term withdrawal rights, then as a matter of structure, the fund must invest in assets which will enable that liquidity obligation to be met.

Specific provisions in the Corporations Act deal with the difference between liquid and illiquid funds and the types of liquid investments which would be required to satisfy withdrawal requests. Venture capital or private equity vehicles formed as venture capital limited partnerships or early stage venture capital limited partnerships must invest only in certain eligible venture capital investments which excludes certain sectors, such as companies involved in the provision of finance, real estate or infrastructure; although it can include certain start-up fintech businesses.

As alternative investment funds AIFs are usually offered only to wholesale non -etail clients, the key disclosure document is the information memorandum, however named, which must not contain information that is misleading or deceptive whether by inclusion or omission.

Reporting, governance and risk management requirements differ according to whether the fund is registered or unregistered. For unregistered funds, this will depend largely on what is promised in the information memorandum. If the fund is offered to retail clients and is therefore registered, the trustee responsible entity must be appropriately authorised and a compliance committee must be established for the fund unless more than half of the directors of the responsible entity are independent directors.

If the fund is unregistered as is typically the case with AIFs that are offered to wholesale clients only , it will not be subject to any legislative reporting, governance or risk management requirements; but the licence-holding trustee or manager will be subject to legislative risk management requirements, including in relation to conflicts of interest and risk management processes.

Funds that are offered to retail investors and use an absolute return, hedge, infrastructure, mortgage or direct real estate investment strategy must report to investors annually based on a set of disclosure principles and benchmarks. This structure became very common for investment in infrastructure such as toll roads, seaports and energy utilities.

Although there has been long-standing use of these types of stapled structures, the Australian government recently enacted measures to limit the benefits of stapled structures —albeit with a transitional period of continuing favourable treatment for certain eligible arrangements. At the same time, steps were taken to codify, and to an extent pare back, access to concessional tax treatment through flow-through trusts for foreign pension funds and sovereign entities.

There are special rules for eligible domestic investment trusts that are widely held, known as managed investment trusts MITs. Unit trusts that are eligible to meet the criteria for MIT status may attract a concessional tax profile for non-resident investors, including potentially :.

Additionally, MITs can elect for capital account treatment of gains on the realisation of eligible investments subject to various exceptions, including land held as trading stock, debt interests and certain financial arrangements , which may be advantageous to both Australian and foreign resident investors.

For example, non-resident investors are subject to withholding tax under the capital account election only in relation to gains from the disposal of an interest held directly, or in some cases, indirectly by the MIT in real property situated in Australia defined broadly. Australian resident individuals and superannuation funds, on the other hand, can access discounted capital gains tax treatment where the relevant investment was held by the MIT for at least 12 months.

Unit trusts may be operated in any manner as determined in the trust deed adopted by the trustee, which may, for example, provide for operation as either an evergreen or closed-end fund. It also allows the trusts to correct errors or delays in finally ascertaining trust income by making adjustments in the year the need for correction is discovered, rather than having to reopen prior year distributions and tax filings.

Some controversy has arisen as to how these rules apply to investments by foreign limited partnerships which are eligible for flow-through treatment in the home jurisdictions of the investing partners eg, the United States and hence arguably entitled to flow-through tax treatment under Australian tax treaties with those jurisdictions. Litigation in the federal courts has not yet finally resolved the issue, but has apparently concluded that the limited partnership itself cannot claim the benefit of the treaty protections for transparent vehicles Commissioner of Taxation v Resource Capital Fund IV LP [] FCAFC Limited partnerships are generally treated under Australian tax law as companies — that is, they are taxed at the company tax rate and do not offer flow-through tax treatment.

However, exceptions to this general rule apply to limited partnerships that are registered with the Australian government to engage in eligible venture capital investment activities. These types of limited partnerships can be used for certain venture capital and certain private equity investment strategies. Each of these may be eligible for certain capital gains tax concessions on qualifying investment activities. For example, eligible foreign investors will generally not be subject to Australian tax on realised capital gains by VCLPs on eligible venture capital investments held for at least 12 months.

Early stage investor tax concessions may also be available to start-up fintech businesses for investments made after 1 July Australian investment fund managers and advisers are generally treated in the same way as regular taxpayers. In general, income and other rewards for management or advisory services will be taxed as ordinary income; there is a capital gains tax treatment for carried interests in venture capital partnerships in certain cases.

Foreign investment fund managers and advisers are generally exempt from Australian taxation, provided that they do not have a permanent establishment in Australia; but in some cases they may be taxed on Australian-sourced fee income — for example, if operating through a dependent agent in Australia. Distributions of carried interests from a MIT may in some cases be deemed to be Australian-sourced income.

Foreign investment funds using Australian-based managers, advisers or agents need to be careful not to establish a taxable Australian presence. In , the tax laws were amended to introduce the investment manager regime IMR , to enable an IMR-compliant foreign fund to retain its non-resident tax status for qualifying portfolio investments if its Australian presence is limited to using an eligible independent Australian fund manager.

The IMR also confirms that qualifying portfolio investments will not be subject to Australian income tax where they are held by eligible widely held foreign funds that do not have an Australian manager and do not otherwise have a permanent establishment or trading business in Australia. There is generally flow-through of tax in funds which are structured as unit trusts so that investors typically share their tax burdens proportionate to their holdings in the funds see question 8.

The unit trust structure is the most commonly used because of its flow-through tax treatment and potential access to concessional tax treatment of distributions to foreign investors. See question 8. The landscape for alternative investment funds AIFs in Australia is promising, especially for the pension industry. The pool of investable capital from Australian superannuation funds comprising both large public offer funds and self-managed superannuation funds is among the largest in the world largely due to the compulsory retirement savings regime introduced in the s.

Superannuation funds are constantly on the lookout for investment opportunities which may provide enhanced returns for their members. Many foreign investment managers and distributors and advisers are generally familiar with the Australian sophisticated and professional investor's style, local investment fund structures and tax issues, and many are therefore comfortable with establishing satellite or feeder funds for Australian investors. Corporate and limited partnership fund structures: In the — budget, as part of the Ten-Year Enterprise Tax Plan, the government announced that it would introduce tax and regulatory frameworks for two new types of collective investment vehicles CIVs : the corporate collective investment vehicle CCIV and the limited partnership CIV.

On 19 January , the Treasury released comprehensive exposure drafts of both the regulatory and tax legislation for the CCIV regime. However, the relevant legislation is still to be enacted at the time of writing. The CCIV regime enables asset management firms to structure an investment fund as a corporation and is designed to be an internationally recognisable investment vehicle that can be marketed to foreign investors. Legislation facilitating more widespread use of a limited partnership structure is also proposed currently, limited partnerships are used only in the private equity and venture capital sectors , and it is hoped will follow closely after finalisation of the CCIV legislation.

The overarching aim of such legislation is to provide a choice of tax-transparent structures unit trusts, corporations or limited partnerships , but with equivalent governance features. The introduction of these alternative structures reflects industry feedback that corporations and limited partnerships are more familiar legal structures in many markets outside Australia, including across Asia.

The new structures aim to complement other recently enacted legislation the Corporations Amendment Asia Region Funds Passport Act aimed at facilitating the cross-border marketing of similarly regulated fund products across jurisdictions that are signatories to the new Asia Region Funds Passport regime initially Australia, South Korea, Thailand, New Zealand and Japan. Tighter measures for the retail investor environment: As noted above, the new Australian Securities and Investments Commission intervention powers and product design and distribution obligations will change the landscape for AIFs offered to retail clients.

Advisers and other distributors of alternative investment funds will also need to have regard to the Financial Planners and Advisers Code of Ethics introduced by the Financial Adviser Standards and Ethics Authority. Over the next 12 months, we expect that there will be continued government initiatives to enhance the establishment and prospering of technology based and venture capital funds for structures, see question 2.

This undertaking is being promoted and managed by the Department of Industry, Innovation and Science. Real estate investment funds have for many years been a large and important part of the investment landscape in Australia, mainly for industrial and commercial property investments. Other types of AIFs likely to grow in the near future are climate change and impact investing funds there has already been rapid growth in ethical investment funds , high-yield corporate bonds and other investment types designed to provide a decent return in a low inflation, low interest rate environment.

Private equity funds in Australia largely adopt the best practice reporting and valuation guidelines formulated by their industry body, the Australian Investment Council AIC formerly the Australian Private Equity and Venture Capital Association. The AIC represents private equity, private credit funds, sovereign wealth and other institutional investors including large superannuation entities , and are largely aligned with the private equity principles formulated by the Institutional Limited Partners Association.

As the domestic private equity funds industry continues to attract significant investment from foreign investors, we also expect to see the continued alignment of domestic private equity funds terms with those in other developed private equity markets. The introduction of alternative collective investment structures, coupled with the Asia Region Funds Passport, should assist Australian asset managers to more effectively access foreign investor markets.

Australian managers should continue to be supported by the reforms of several years ago and since adopted in practice under the investment manager regime see question 8. In terms of foreign asset manager access to the Australian investor market, the new foreign Australian financial services licence regime will involve an upfront cost in the associated application process. This should, however, provide certainty for managers in terms of a clear pathway for access to the Australian market and enhance Australian investor confidence associated with engaging with foreign managers.

The industry is expecting sustained foreign investor interest in Australian real estate, agriculture and infrastructure investment exposure. MIT structures are becoming understood by more and more well-known large foreign investors, and accepted as the gateway necessary to access a concessional withholding tax profile and deemed capital account election. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Learn More Accept. Finance and Banking. Khoury and Kon Mellos. Your LinkedIn Connections with the authors. To print this article, all you need is to be registered or login on Mondaq. What powers do they have? Additional screening requirements apply for investment by foreign government investors including sovereign wealth funds and investment funds and other entities in which any foreign government investor has a significant interest; the Takeovers Panel, which focuses on resolving takeover or corporate control-related disputes arising in relation to listed or other widely held entities; the Australian Taxation Office, which is the federal revenue collection agency and is also charged with regulating the self-managed superannuation fund sector; and the revenue agencies of the states and territories, which are responsible for stamp duties and land taxes on land, mining and infrastructure-related transactions.

The advantages of establishing a fund in Australia as a unit trust are: the recognisability of the product in the Australian market; the flow-through tax treatment for investors — in particular: flow-through of capital gains tax discount benefits on capital gains for resident individuals and superannuation funds; and flow-through of concessional tax rates on dividends, interest, royalties and non-Australian source income and gains for non-resident investors; and potential access to concessional tax rates for foreign entities in treaty countries, sovereign entities and certain foreign pension funds.

If yes, what legal protections are in place to protect the alternative investment fund's assets? If yes, what considerations are required and what are the steps involved? Do any restrictions apply in this regard? If so, please provide details. If yes, please provide details of any specific requirements. If yes, do any additional requirements apply? If so, are there specific requirements? Disclosure obligations also apply when an AIF acquires or disposes of, individually or jointly, control of a non-listed company, other than a small or medium-sized entity or a real estate special purpose vehicle.

Among other things, the information required includes details of the main trading instruments, the principal exposures and the most important concentrations of the AIFs they manage. It must contain at least the information set out in Article 20 2 of the AIFM Law ie, balance sheet, income and expenditure account, report on activities, any material changes in the information listed in Article 21 of the AIFM Law, total amount of remuneration paid by the AIF to its staff, carried interest paid by the AIF and remuneration broken down by senior management.

The governing body of an AIFM or internally managed AIF must be composed of at least three members, who must possess sufficient skills and professional experience, and be of good repute. The number of hours dedicated to professional engagements cannot exceed 1, hours per year for each member of the governing body; and the number of mandates in regulated entities and in operating companies cannot exceed 20 mandates.

The governing body must meet at least once every quarter and its work must be documented in writing. Additional requirements apply to the senior management of the AIFM. Each AIFM must have at least two conducting officers, permanently located in Luxembourg, bound by a full-time employment contract. Certain derogations may be granted, depending on the size of the assets under management of the AIFM.

The conducting officers must possess sufficient skills and professional experience in light of the type and investment strategies of the AIFs, and demonstrate their good repute. Conducting officers must be members of the executive committee of the AIFM. There are certain incompatibilities in the exercise of the functions in order to ensure the independence of the management body of the AIFM. Risk management requirements apply to AIFMs.

There must be a functional and hierarchical separation of the risk management function from the operating units and from the portfolio management functions. AIFMs must also implement adequate risk management systems in order to identify, measure, manage and monitor risks.

Such risk management systems must be reviewed and least once a year and be adapted when necessary. Finally, AIFMs must set a maximum level of leverage which they may employ on behalf of the AIF and limit on the reuse collateral or guarantee granted under a leveraging arrangement. Alternative investment funds AIFs set up under the legal form of a limited partnership or a special limited partnership and that do not carry out or are not deemed to carry out a commercial activity should be considered as tax-transparent entities.

In such case, income and wealth received and held by tax-transparent AIFs are taxable at the level of the investors. The direct tax treatment applicable to AIFs structured as tax-opaque entities ie, under the legal form of a joint stock company, private limited company or corporate partnership limited by shares depends on the legal regime to which they are subject. Undertakings for collective investment UCIs , specialised investment funds SIFs and reserved alternative investment funds RAIFs are exempt from corporate income tax, municipal business tax and net wealth tax.

For companies located in Luxembourg City, the aggregate corporate income tax and municipal business tax rate ranges from The net wealth tax rate is 0. Luxembourg managers and advisers structured as a SOPARFI under the legal form of a tax-opaque entity ie, a joint stock company, private limited company or corporate partnership limited by shares are subject to corporate income tax, municipal business tax and net wealth tax at the standard rates as described in question 8.

Individual managers and advisers that are Luxembourg tax residents are subject to Luxembourg personal income tax on their worldwide income subject to tax treaty provisions. The Luxembourg income tax liability is based on the individual's personal situation and takes into consideration various personal tax allowances and deductions.

Management and advisory fees qualify as income from independent activities. The Luxembourg personal income tax is calculated in accordance with a progressive rate ranging from 8. The beneficiaries of the management and advisory fees should also be liable for social security for self-employed persons at a rate of Social security contributions are deductible for personal income tax purposes except for the dependent contribution.

Carried interest paid to qualifying employees as an incentive for the AIF's performance can be taxed at the maximum progressive rate of However, qualifying employees can benefit from such tax incentive only for a maximum of 10 years and to the extent that they transferred their tax residence to Luxembourg before 31 December Individuals that are Luxembourg tax residents and that invest in AIFs structured as tax-transparent entities ie, limited partnership or special limited partnership are directly subject to personal income tax under the rules described in question 8.

Luxembourg tax resident individuals investing in SIFs, SICARs, RAIFs and SOPARFIs structured as tax-opaque entities ie, joint stock company, private limited company or corporate partnership limited by shares are subject to personal income tax on income and gain received and realised from these entities under the rules described in question 8.

Investors structured as standard Luxembourg companies eg, SOPARFIs are subject to corporate income tax, municipal business tax and net wealth tax at the standard rates as described in question 8. These two sets of law share similar goals and concepts, as they create specific due diligence and reporting obligations for financial intermediaries based in Luxembourg. Investment funds are within the scope of these rules, except for certain exemptions provided by IGA Model 1 among others, Luxembourg retirement funds and local banks.

Based on these rules, Luxembourg-based investment funds must collect self-certification forms from their investors in order to evidence the tax residence of the individuals who invest directly or indirectly in them. Furthermore, Luxembourg-based investment funds must report, on an annual basis, the amounts of their interests in the funds, as well as any type of income deriving from the funds for these investors.

The international and European tax landscape for AIFs has been significantly reshaped since In Luxembourg, several measures have been implemented to adapt the country tax toolkit in accordance with international and European tax changes.

The measures that affect tax strategies for AIFs include:. Therefore, tax strategies for AIFs have focused on maximising interest deductibility and cash-flow efficiency while reinforcing the substance and beneficial ownership by using, notably, regulated structures with a mix of tax-transparent and tax-opaque vehicles.

AIFs investing in real estate could be structured with a RAIF having the legal form of a special limited partnership or a joint stock company with variable capital. Luxembourg remains the first investment fund centre in Europe and the second in the world. Luxembourg is also a major hub for EU and global asset managers, with the presence of 98 of the largest European asset managers.

Unregulated AIFs offer legal structuring flexibility while allowing for timely marketing and launch, without being subject to the prior authorisation or ongoing supervision of the Luxembourg regulator, thus saving time and cost for managers. With the adoption of a directive and regulation on the cross-border distribution of collective investment funds in summer , a new legal and regulatory framework will harmonise the rules and reduce the barriers and costs for the cross-border distribution of investment funds within the European Union, including Luxembourg.

The regulation entered into force on 1 August , while the directive must be transposed into national law by July Pre-marketing will be allowed for EU AIFMs, so that fund managers will be able to test the appetite of potential investors for new investment strategies. However, pre-marketing activities will be subject to certain requirements - in particular, formal notification of the home regulator. In case of pre-marketing, EU AIFMs will not be allowed to rely on reverse solicitation for 18 months from the beginning of the pre-marketing activity, which will substantially limit the possibility to have recourse to reverse solicitation.

Pre-marketing and marketing activities will be permitted only for certain entities, such as AIFMs, investment firms, credit institutions, undertakings for collective investment in transferable securities management companies and tied agents. New requirements have also been introduced regarding the de-notification of marketing activities. Requirements applicable to regulatory fees and charges will also be aligned across EU member states. The steady growth of the number of unregulated AIFs, such as the RAIF and limited partnerships, should continue apace in the coming years.

There is a clear preference and market demand for a single-tier regulatory model ie, regulation of the AIFM only , instead of a double-tier regulatory model ie, regulation of the AIF and regulation of the AIFM. The ongoing review of the AIFM Directive by the European Securities and Markets Authority may give greater insight into the key topics which will be probably addressed at level 2, via regulations or a full review of the AIFMD, such as the rules on remuneration, the depository rules, the national private placement regimes and the AIFMD third country passport.

Luxembourg offers a wide range of legal structuring tools which may address the requirements and specificities of different projects. Managers targeting a lower level of assets under management with minimum regulatory obligations may consider setting up a non-regulated AIF in the form of a Luxembourg special or common limited partnership and appointing a registered AIFM, thus eliminating the costs and regulatory burden associated with the appointment of an authorised AIFM and depositary.

The special limited partnership is an efficient launch pad, as it is quick to set up and well suited for projects requiring contractual flexibility and cost efficiency. The major drawback is the absence of a marketing passport and the impossibility of setting up an umbrella structure with segregated compartments.

Should the targeted level of assets under management exceed the thresholds set out in Article 3 2 of the AIFM Law, it may be worth considering a reserved alternative investment fund, which may be structured as an umbrella fund.

Although an authorised AIFM will have to be appointed, it will make the EU marketing passport available to market the fund to professional investors across the European Union, thus turning costs into additional opportunities. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. All Rights Reserved. Password Passwords are Case Sensitive. Forgot your password? Free, unlimited access to more than half a million articles one-article limit removed from the diverse perspectives of 5, leading law, accountancy and advisory firms.

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To print this article, all you need is to be registered or login on Mondaq. What powers do they have? The CSSF may impose certain sanctions or administrative measures with respect to AIFMs and AIFs which are subject to its supervision, such as the following: to access documents and request additional information including existing data records and telephone conversations ; to carry out on-site inspections and investigations; to request the cessation of any illegal practice; to request the freezing or sequestration of assets; to temporarily prohibit the exercise of professional activities with respect to persons subject to its prudential supervision; to withdraw the authorisation granted to AIFMs and AIFs subject to its supervision; and to transmit information to the state prosecutor for criminal prosecution.

It may further disclose such penalties to the public. The main types of alternative investment funds AIFs in Luxembourg are as follows: hedge funds; private equity funds; real estate funds; infrastructure funds; debt funds; commodity funds; funds of funds; master-feeder funds; and European long-term investment funds.

If yes, what legal protections are in place to protect the alternative investment fund's assets? If yes, what considerations are required and what are the steps involved? Do any restrictions apply in this regard? Please see questions 2. To this end, the CSSF will require the following documents from each board member: a dated and signed CV; a certified copy of his or her ID or passport; a declaration of honour form; an excerpt from the criminal record s ; and a time allocation assessment form.

Additional information and documents may be requested by the CSSF. They may also, by derogation and under certain conditions, provide the following additional services: management of portfolio of investments, including those owned by pension funds and institutions for provision of occupational retirement in accordance with mandates given by investors on a discretionary, client-by-client basis; and non-core services ie, investment advice, safekeeping and administration regarding shares of UCIs, receipt and transmission of orders in relation to financial instruments, only if the investment management functions are provided.

An AIFM must either be authorised or registered, based on the following criteria. Moreover, an external AIFM may additionally provide: discretionary portfolio management services on a client-by-client basis; and non-core services eg, investment advice as set out in Article 5 4 of the AIFM Law. If so, please provide details. If yes, please provide details of any specific requirements. No delegation or sub-delegation can be made to the depositary or a delegate of the depositary, or to any entity which may give rise to conflict of interest, unless: the entity has functionally and hierarchically separated the performance of its portfolio or risk management tasks from other potentially conflicting tasks; and the potential conflicts of interest are identified, managed, monitored and disclosed to investors of the AIF.

If yes, do any additional requirements apply? If so, are there specific requirements? AIFs must be subject in their home state to: regulation providing investors guarantees of protection; and supervision at least equivalent to that provided by Luxembourg laws governing AIFs authorised to be marketed to retail investors in Luxembourg; and There must be cooperation between the CSSF and the supervisory authority of the AIF. This must include, among other things, information on: the investment strategy and policy of the AIF; the types of assets in which the AIF may invest; the techniques it may employ; the use of leverage; information on the identity of the service providers and the AIFM; investors' rights; a description of the delegation by the AIFM and the depositary; the valuation procedure; liquidity risk management; fees and expenses; information on the issue and sale of interests; the net asset value of the AIF; and its performance.

The AIFM must notify the acquisition of control by the AIF: to the non-listed company; to the shareholders; and to the CSSF, together with information regarding the consequences on the voting rights, the conditions subject to which the control was acquired and the date on which control was acquired.

Authorised AIFMs must regularly report to the CSSF on: the principal instruments and markets in which they trade; the principal exposures and most important concentrations; the main categories of assets including percentages subject to special arrangements due to their illiquid nature ; and the risk profile and risk management systems employed. AIFMs must comply with the following minimum requirements: Conduct due diligence when investing on behalf of the AIF in accordance with the investment strategy, objectives and risk profile of the AIF; Ensure identification, measure and monitoring on an ongoing basis including through use of stress testing procedures of the risks associated with each investment position of the AIF and the overall effect on the AIF's portfolio; and Ensure that the risk profile of the AIF corresponds to the size, portfolio, structure and investment strategies and objectives of the AIF, as set out in the constitutive documents of the AIF.

The choice of structure will largely depend on a combination of several factors, including: the investment strategy; the assets; the size of the alternative investment fund AIF ; the profile and location of the investors; the time to market; the level of regulation needed; cost efficiency; and tax considerations. It is some time since our last bulletin, and it is a very different world. Perhaps one way of encapsulating this year will be Dickens' words: "it was the best of times, it was the worst of times".

Unsustainable Risks? Fast forward seven years, and this directive is still evolving, but now with a new focus: sustainability. A lasting power of attorney LPA is a legal document which gives another person of your choice the ability to make decisions on your behalf.