The Right Legal And Government Framework
Selecting the right legal and governance framework for the co-investment vehicle is one of the key considerations in implementing a successful co-investment structure, even more important in the current regulatory climate. The optimal structure will depend on a number of factors including where and to whom the co-investment opportunity is to be marketed, the nature of the potential co-investor base and the identified portfolio investment assets. Tax, compliance and regulatory issues will of course also be important in determining the structure.
Utilising a newly formed partnership is often preferred where there are multiple co-investors. This structure sees the fund and the co-investors invest on a side-by-side basis into a newly formed legal entity, which will hold the portfolio investment.
What Does Co-Investments Mean For Fund Administration?
More and more PE funds are moving towards outsourcing their fund administrative tasks to third parties, this now extends beyond the traditional accounting and investor services function to compliance and regulatory reporting. The reason for this shift is attributable to funds seeking more transparency and efficiencies.
Fund administrators provide segregation of certain key controls from the fund manager, as well as offering sophisticated accounting and investor services systems and increasingly technical professionals upon whom the manager can call. The fund administrator is also well positioned to efficiently facilitate the communications of the fund stakeholders and legal counsel through the formation and launch of the fund, including timely setup of banking services leveraging existing relationships. The ever-increasing compliance and tax transparency requirements add to the elements of a fund’s operations which can more efficiently be placed with an independent administrator, allowing the manager to focus on the key management and portfolio functions.
Sarah Demerling is a client director and senior manager at Estera Services (Bermuda) Limited.