Structure
Structure is rarely the reason we allocate and frequently the reason a process stalls. The vehicles below are the ones we encounter most often. Nothing here is legal or tax advice, and every allocation involves the relevant advisers on both sides before documents are signed.
Onshore UK vehicles
UK-domiciled structures bring the advantage of a familiar legal and regulatory framework, an established service provider market, and a supervisory regime that our own investors generally understand without explanation. For managers based in the United Kingdom, an onshore structure also removes questions about substance and management location that increasingly attract attention elsewhere.
The considerations we work through are the eligibility of our investors for the vehicle in question, the tax treatment of returns in the hands of the end investor, reporting status where relevant, and whether the structure permits the dealing and transfer mechanics we need.
Offshore vehicles
Cayman, Luxembourg, Ireland, the Channel Islands and Malta account for most of the offshore structures we see, each with a different profile. The questions we ask are consistent regardless of jurisdiction: who supervises the vehicle and with what powers; what the directors' independence and workload look like; which administrator and auditor are appointed and whether they are recognisable names with a real presence in that jurisdiction; and what the practical enforcement position would be in a dispute.
Independent directors deserve more attention than they usually receive. A director serving on a very large number of boards is not able to provide meaningful oversight of any of them, and that is a governance finding we treat seriously.
Master-feeder arrangements
Where a manager operates a master-feeder structure we examine how expenses are allocated between feeders, whether the feeders have equivalent liquidity terms, and what happens if one feeder experiences disproportionate redemptions. Asymmetric terms between feeders create a situation where one group of investors bears the cost of another's exit.
Side letters and their consequences
We read the existing side letter position before we invest. Preferential liquidity granted to an early investor is a live risk to everyone else: in stress, that investor exits first and the remaining holders own a less liquid portfolio. We ask managers to disclose the categories of preferential terms in place, and we prefer structures where liquidity is uniform even if fees are not.
Substance and management location
Where the investment management activity actually takes place matters increasingly for both tax and regulatory purposes. A vehicle domiciled in one jurisdiction, administered in a second and genuinely managed from a third should have a coherent explanation for that arrangement. We ask for it.
Our practical approach
We are structure-agnostic within limits. We will work with well-run vehicles in established jurisdictions, and we will fund through a managed account where the existing structure does not suit us. What we will not do is accept a structure we do not understand, or one where the documents grant discretion that could be exercised against us without recourse.