Dec. 10, 2020

2020 Year‑End Tax‑Planning Considerations for Fund Managers

Although 2020 has not gone the way anyone planned or expected, some things never change or go away – even in the midst of a pandemic – and that includes taxes. Thus, the principals of hedge fund managers and other high net worth individuals still need to take stock of their potential tax exposure before year-end. The end of the year is also the time for fund managers to consider their funds’ tax pictures as well. In fact, given the pandemic and the possible consequences of a change in administration in the White House, year-end tax planning in 2020 may be even more important than in other years. The Hedge Fund Law Report spoke to Philip S. Gross, partner at Kleinberg Kaplan and chair of the firm’s tax department, about year-end tax-planning issues for both the principals of hedge fund managers and their funds, including any special considerations for 2020 due to the coronavirus pandemic and the results of the presidential election. This article sets forth his thoughts on those topics. For additional insights from Gross, see “Considerations for Hedge Fund Managers When Evaluating Management Shares for Their Cayman Funds” (Jun. 20, 2019); and “How to Draft Key Hedge Fund Documents to Take New Partnership Rules Into Account” (Feb. 11, 2016).

Establishing a Best‑in‑Class Governance Framework for Cayman Funds (Part Two of Two)

The role of professional independent directors in the alternative investment funds industry in the Cayman Islands has greatly evolved over the past 20 years. The demand by both regulators and investors for better governance and increased independent oversight over the management and administration of investment funds has been driven by high-profile fraud cases, as well as key changes in U.S. and global economic cycles. In a two-part guest series, Sabrina Foster, independent director and GC with Athena International Management, explains how to establish a best-in-class governance framework for Cayman funds. This second article analyzes board meetings, service provider reports and board self-assessments. The first article explored board selection and composition, as well as on‑boarding directors. See “Corporate Governance Best Practices for Cayman Islands Hedge Funds” (Jan. 19, 2012).

SEC Annual Report Highlights Pandemic Response, Enforcement Focus Areas and Whistleblower Program Success

The SEC’s Division of Enforcement (Division) has released its fourth Annual Report (Report). The Report covers the SEC’s 2020 fiscal year and discusses the Division’s response to the coronavirus pandemic; its efforts to streamline operations; the continuing success of the SEC’s whistleblower program; and the nature of its 715 enforcement proceedings, which yielded $4.68 billion in total monetary relief and $602 million in anticipated payments to affected investors. This article discusses the key takeaways from the Report and the accompanying message from Division Director Stephanie Avakian. For coverage of the Division’s first three reports, see 2017 Report, 2018 Report and 2019 Report.

Navigating the Evolving Legal and Regulatory ESG Investing Terrain (Part Two of Two)

Investing that takes into account environmental, social and governance (ESG) factors appears to be increasingly important to the asset management industry. At the recent Seward & Kissel 2020 Private Funds Forum, a panel provided an analysis of the evolving business and regulatory landscape for ESG investing. The program featured Seward & Kissel partners Debra Franzese, Patricia A. Poglinco and John Ryan, as well as Simmons & Simmons partner Lucian Firth. This two-part series highlights the key takeaways from the presentation. This second article reviews the challenges posed by new interpretations of the duties of ERISA fiduciaries, the E.U.’s new sustainable finance disclosure regulation and the outlook for ESG investing. The first article covered defining ESG, the key drivers of ESG investing and the SEC’s approach to ESG. See “ESG Considerations for Fund Managers: The U.S. Landscape (Part One of Two)” (Jun. 25, 2020); “Survey Identifies Drivers and Obstacles for Sustainable Investing” (Apr. 2, 2020); and “IFI Global Panel: ESG Will Fundamentally Transform Investing in the Coming Decade” (Mar. 12, 2020).

EY 2020 Survey Compares Perspectives of Institutional Investors and Private Fund Managers (Part One of Two)

EY recently released its 14th annual Global Alternative Fund Survey, which, as in its prior surveys, compares and contrasts the perspectives of institutional investors with those of hedge fund and private equity fund managers. This two-part series outlines the survey’s findings. This first article explores how managers performed and serviced their investors during the coronavirus pandemic; the long-term impact of the pandemic on managers’ operations; managers’ use of automation, technology, data analytics and FinTech; managers’ strategic priorities; investor allocation preferences; and evolving fund and fee structures. The second article will address the rapidly evolving responsible investing landscape and the growing importance of remote operations, as well as diversity and inclusion in talent management. See our coverage of EY’s 2019 Survey, 2018 Survey; 2017 Survey; 2016 Survey; and 2015 Survey.