Chapter 13

Comparisons and Conclusions

13.1 INTRODUCTION

The focus of this book has not been on investment risk, economic returns or other commercial assessments. Instead, I have sought to explain a range of fund products, the logic behind their establishment and the way they are structured. In doing this, I have reviewed the legal environment and the applicable tax and regulatory regimes in which these funds operate within the broader context of alternative asset management.

This is an industry that moves rapidly and one that is required to be highly responsive to macroeconomic changes. There are many industry constants but what is in vogue one year will more than likely need revisiting the next. The search for the structure and strategy that generate the greatest returns for the lowest risk, within an investor-, tax- and regulator-friendly model, is a constantly evolving one.

13.2 EVOLVING STRUCTURAL DRIVERS

13.2.1 Tax efficiency

Tax planning is one of the constant themes of fund engineering. It is less about tax avoidance (although not if you believe what you read in the newspapers) but more to ensure that the investor is no worse off as a result of investing through a fund structure than if the investment had been made by the investor directly into the underlying asset.

The key objective is to avoid the additional layer of taxation (often referred to as the ‘double charge’) that may arise where investors invest in a vehicle that in turn invests in an underlying portfolio company. ...

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