In navigating the complex world of private equity investments structures, both General Partners/Fund Managers and Limited Partners/Investors seek specific attributes that align with their respective needs and preferences.
For General Partners (GPs), the pillars of a satisfying investment often revolve around tax efficiency, operational simplicity, and regulatory flexibility. They aim for structures that yield favourable tax outcomes, boast straight forward administrative processes, and incur moderate regulatory obligations. Additionally, maintaining onshore access unless there are compelling reasons for offshore operations is preferred as this ensure familiarity for limited partners.
Conversely, Limited Partners (LPs) prioritise aspects like tax exemption, familiarity with the chosen structure and limited liability. They favoured structures devoid of excessive regulatory burdens or reporting requirements, preferring jurisdictions with solid reputations. Furthermore, avoiding entanglement with U.S. regulatory complexities is a key consideration.
Drawing from experience, it is obvious that tax considerations heavily influence private equity structures, with limited partnerships often meeting the criteria across various offshore jurisdictions. Tax transparency remains a fundamental characteristic appreciated by all involved in limited partnerships.
While simplicity is desirable, real-world scenarios often require more complex arrangements tailored to specific investor groups and their unique tax or regulatory demands. For GPs, tax efficiency regarding management fees and carried interest ranks high, alongside regulatory compliance. Whether the limited partnership requires authorisation and oversight coupled with the associated regulatory reporting obligations is equally importance for the GPs.
The basis of private equity structure, represented by the plain-vanilla model illustrated in Figures 1 and 2, serves as a basic reference point. Despite potential complexities in some structures, understanding these basic frameworks facilitates the understanding of more complex arrangements proposed during the planning and consultation stages.
Figure 3 delineates the master-feeder funds structure, a common approach where investors channel investments through feeder funds into a central fund called the master fund. This structure streamlines investment activities, with management fees typically levied at the master fund level. Symbolic amounts are usually charged at the feeder fund level, with the bulk of management fees incurred at the master fund level and passed on to feeders via allocated NAV.
Such master-feeder configurations frequently serve investors spread across different jurisdictions, offering tax advantages while consolidating investments into a singular portfolio.
No matter which structure you have selected to accommodate your investors and investments, private equity features in a fund are likely to secure approval from the FSC to operate as a Closed-end fund in Mauritius.
