{"id":148416,"date":"2026-09-08T08:53:11","date_gmt":"2026-09-08T08:53:11","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=148416"},"modified":"2026-09-08T08:53:11","modified_gmt":"2026-09-08T08:53:11","slug":"australia-alternative-investment-funds","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/australia-alternative-investment-funds\/","title":{"rendered":"Australia: Alternative Investment Funds"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-148416","comparative_guide","type-comparative_guide","status-publish","hentry","guides-alternative-investment-funds","jurisdictions-australia"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">EY<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/08\/EY_Logo_Beam_RGB_White_Yellow-1.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">EY<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/08\/EY_Logo_Beam_RGB_White_Yellow-1.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Alternative Investment Funds laws and regulations applicable in Australia<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the principal legal structures used for Alternative Investment Funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The principal legal structure used for alternative investment funds (<strong>AIF<\/strong>) is a unit trust where the ownership interests are split into units, with each investor holding one or more units in that trust. This type of trust may otherwise be referred to as a managed investment scheme (<strong>MIS<\/strong>) under the Australian <em>Corporations Act 2001 <\/em>(Cth.) (<strong>Corporations Act<\/strong>). Trust structures are favoured due to their tax transparency, operational flexibility and familiarity among institutional and sophisticated investors in Australia, and these types of investors will often invest in wholesale or \u2018unregistered\u2019 MISs provided those investors satisfy the definition of a \u2018wholesale client\u2019 in the Corporations Act (<strong>Wholesale Client<\/strong>).<\/p>\n<p>However, where interests in an MIS are offered to retail investors (i.e., \u2018retail clients\u2019 under the Corporations Act (<strong>Retail Clients<\/strong>), including individual retail investors), that MIS will be structured as a registered MIS. A registered MIS is an MIS that satisfies certain requirements in the Corporations Act, and is registered with the Australian Securities and Investments Commission (<strong>ASIC<\/strong>). Importantly, registered MISs are subject to a much more prescriptive regulatory regime than unregistered MISs reflecting the higher level of investor protection for Retail Clients.<\/p>\n<p>Registered and unregistered MISs do not have separate legal personality. That is, they cannot enter into agreements, have obligations imposed on them or be expected to perform any actions (among other things). For this reason, a registered MIS will need to have a responsible entity (<strong>RE<\/strong>), and an unregistered MIS will need to have a trustee, appointed to it via the relevant MIS\u2019s trust deed (otherwise known as a constitution) (<strong>Trust Deed<\/strong>). In short, the RE or trustee is responsible for all aspects of the registered MIS or unregistered MIS (as applicable), which include:<\/p>\n<ul>\n<li>The management of the MIS<\/li>\n<li>Engaging service providers (such as managers, custodians, lawyers, tax advisers and auditors) for the MIS<\/li>\n<li>Ensuring that the terms of the MIS \u2013 as outlined in the relevant Trust Deed \u2013 are adhered to<\/li>\n<li>Ensuring that all regulatory requirements applicable to the MIS are complied with<\/li>\n<\/ul>\n<p>Alternatively, where an AIF is a private equity or venture capital fund, a limited partnership structure is typically the preferred legal structure. Under this structure, investors will be limited partners (typically Wholesale Clients) who hold interests (rather than units), and a general partner will be primarily responsible for the limited partnership (in a similar way to a trustee of an MIS).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does a structure provide limited liability to the investors? If so, how is this achieved?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Generally, yes.<\/p>\n<p>The liability of investors in a registered or unregistered MIS will typically be limited to the amount they owe (if anything) in respect of their units in the relevant MIS. For example, if an investor has partly paid units, then their liability will be limited to the outstanding amount they owe on their units. However, investors in a registered or unregistered MIS do not benefit from statutory limitation of liability, so the liability of investors will be limited through a specific provision of the relevant Trust Deed. While such provisions are generally accepted market practice, and are widely used in Australian Trust Deeds, their effectiveness has not been tested by the Courts in Australia.<\/p>\n<p>Similarly, the liability of investors in a limited partnership will generally be limited to the amount they owe (if anything) in respect of their interest in that limited partnership, and this will also be dealt with through a specific provision in the limited partnership agreement.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a market preference and\/or most preferred structure? Does it depend on asset class or investment strategy?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>For hedge funds, private credit funds and infrastructure funds, the preferred structure is generally an Australian unit trust for Australian investors, as it offers significant flexibility from a legal, tax and operational perspective. However, where an Australian manager is seeking to raise capital from offshore investors, they may instead establish an offshore vehicle (e.g., a Cayman Islands company) \u2013 that operates as a feeder fund to the Australian unit trust, or, as a standalone structure with the same investment strategy \u2013 to accommodate investor preferences and cross-border tax and regulatory considerations.<\/p>\n<p>However, limited partnerships are generally the preferred structure for private equity and venture capital funds, primarily due to the Australian tax treatment and requirements of these funds.<\/p>\n<p>The preferred structure may also depend on the nature of the underlying assets from a tax perspective. For example, where a strategy involves direct investments in digital assets, unit trust structures may not be appropriate due to the potential tax flow-through considerations. In those circumstances, alternative structures may be used, such as offshore fund vehicles that hold the digital assets directly (with Australian investors investing indirectly through an Australian feeder fund), bare trust arrangements where direct ownership is commercially required, or structures that provide synthetic exposure to digital assets through derivatives or other financial instruments.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the regulatory regime distinguish between open-ended and closed-ended Alternative Investment Funds (or otherwise differentiate between different types of funds or strategies (e.g. private equity vs. hedge)) and, if so, how?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no distinction between the regulatory regime for an AIF based solely on whether it is open-ended or closed-ended. However, there is a distinction between AIFs from a regulatory perspective where the AIF is:<\/p>\n<ul>\n<li><strong>A registered MIS \u2013<\/strong> the regulatory regime for registered MISs is much more extensive and prescriptive than unregistered MISs (including in relation to disclosure documents, documented compliance arrangements, distribution, liquidity, complaints handling and the regulatory requirements and obligations of the RE)<\/li>\n<li><strong>A registered MIS is a hedge fund <\/strong>\u2013 as ASIC deems the investment strategies used by hedge funds to be more complex, and as registered MISs may have Retail Client investors, there are additional disclosure requirements that need to be met as part of that registered MIS\u2019s Product Disclosure Statement (<strong>PDS<\/strong>) (i.e., the offer document for a registered MIS)<\/li>\n<li><strong>Focussed on environmental, social or governance (ESG)-related investments (ESG Fund)<\/strong> \u2013 irrespective of whether the MIS is registered or not, ASIC has a significant focus on \u2018greenwashing\u2019 (e.g., where ESG claims are made by a manager, which are false or cannot be substantiated). The regulatory regime is not entirely different for ESG Funds, but ASIC has an increased level of scrutiny in relation to ESG-related claims made by managers regarding ESG Funds<\/li>\n<li><strong>Digital asset funds \u2013 <\/strong>there is not a separate regulatory regime for digital asset funds. However, managers investing in digital assets may need to consider additional regulatory requirements depending on the nature of the assets and activities undertaken, including the required Australian financial services licence (<strong>AFSL<\/strong>) authorisations for digital assets and the custody of the relevant digital assets<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any limits on the manager\u2019s ability to restrict redemptions? What factors determine the degree of liquidity that a manager offers investors of an Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Generally:<\/p>\n<ul>\n<li>The trustee of an unregistered MIS<\/li>\n<li>The general partner of a limited partnership<\/li>\n<\/ul>\n<p>can have considerable flexibility when determining the redemption rights applicable to investors in those AIFs. The manager may have some influence over the redemption restrictions that are imposed, but it is generally a matter for the trustee or general partner (as applicable).<\/p>\n<p>However, the RE of a registered MIS needs to adhere to strict requirements in Chapter 5C of the Corporations Act in relation to redemptions and the liquidity of that registered MIS. For example:<\/p>\n<ul>\n<li>When the registered MIS is not liquid (i.e., when less than 80% of the registered MIS\u2019s assets by value are \u2018liquid\u2019 assets \u2013 e.g., cash in a bank account, term deposits or listed securities), the RE must adhere to the processes outlined in Chapter 5C of the Corporations Act and the relevant Trust Deed when making and processing withdrawal (redemption) offers to investors<\/li>\n<li>Under <em>ASIC Regulatory Guide 134: Funds management: Constitutions<\/em>, ASIC generally expects that redemptions from a registered MIS are to be satisfied by payment to the redeeming investor within 21 days (from when that investor ceases to hold the relevant units in the registered MIS), unless certain circumstances exist (e.g., an extreme market event)<\/li>\n<\/ul>\n<p>The redemption restrictions for investors are contained in the constituent document for the relevant AIF. However, the offer document for the fund (PDS for registered MISs, or information memorandum (<strong>IM<\/strong>) for unregistered MISs and limited partnerships) will generally summarise the relevant constituent document\u2019s redemption restrictions.<\/p>\n<p>Redemption rights offered to investors are largely driven by whether the fund is open or closed-ended and by the liquidity of its underlying assets. For example, an open-ended fund that primarily invests in liquid assets like listed equities (e.g., hedge funds) is less likely to have restrictive redemption rights \u2013 as the underlying assets can be easily sold to satisfy redemptions. Whereas, closed-ended funds that only invest in illiquid assets (e.g., private equity funds) will have much more restrictive redemption rights because the underlying assets cannot be sold quickly.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are potential tools that a manager may use to manage illiquidity risks regarding the portfolio of its Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Managers can manage illiquidity risks through the use of:<\/p>\n<ul>\n<li>Cash reserves<\/li>\n<li>Lock-up periods<\/li>\n<li>Early redemption fees to deter investors from redeeming their interests in the AIF<\/li>\n<li>Redemption gates (e.g., limiting the amount of redemptions for a given period to a certain percentage of an AIF\u2019s net asset value (<strong>NAV<\/strong>))<\/li>\n<li>Powers to suspend or delay redemptions<\/li>\n<li>Side pockets, where redeeming investors and certain illiquid assets are moved into a separate class of units in the AIF and, once those assets are sold, the investors in that class receive the sale proceeds<\/li>\n<li>In-specie distributions<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions on transfers of investors\u2019 interests?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Generally, the transfer of investor interests in an AIF will require the consent of the trustee, RE or general partner (as applicable), and may also be subject to the transferee meeting certain regulatory or tax requirements. For example, the trustee of an unregistered MIS would not consent to a transfer where the transferee was a Retail Client \u2013 as they cannot directly invest into an unregistered MIS.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any other limitations on a manager\u2019s ability to manage its funds (e.g., diversification requirements)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no statutory diversification requirements on AIFs, but managers need to ensure that the AIF is being managed in accordance with the relevant investment management agreement (<strong>IMA<\/strong>), the AIF\u2019s constituent and offer documents, and any conditions on the AFSL\/AFSL exemption it is operating under. Typically, these items may impose restrictions on permitted and prohibited investments, leverage in relation to the AIF, related-party transactions, investment size and liquidity management.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the local tax treatment of (a) resident, (b) non-resident, (c) pension fund and (d) sovereign wealth fund investors (or any other common investor type) in Alternative Investment Funds? Does the tax status or preference of investors or the tax treatment of the target investments primarily dictate the structure of the Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The tax treatment for the different classes of investors in AIFs is in part dependent upon the implemented vehicle (i.e., a trust or limited partnership), the ownership or membership interest held by that investor and the nature of the underlying investment.<\/p>\n<p>Australian tax resident investors will typically incur tax based on income allocated or distributed to them according to the taxation rules governing the relevant vehicle, with the rate of tax payable determined by the nature of the Australian tax resident investor (i.e., individual, superannuation fund, company, trust etc.) and whether the gain is on capital or revenue account.<\/p>\n<p>Non-resident investors typically qualify for Australia\u2019s non-resident capital gains tax exemption in respect of distributions of capital gains where the gain is not derived from taxable Australian property, including interests whose value is principally attributable to Australian real property. A statutory exemption is afforded to qualifying (non-resident) limited partners of a venture capital limited partnership (<strong>VCLP<\/strong>) or early-stage venture capital limited partnership (<strong>ESVCLP<\/strong>). Income distributions and gains derived from taxable Australian property may be taxable to non-resident investors, and subject to a minimum withholding tax depending on the nature of the vehicle. Certain sovereign wealth funds and foreign pension funds may qualify for specific statutory exemptions from Australian income tax on certain passive investment income, subject to satisfying the relevant portfolio interest, influence and other eligibility requirements.<\/p>\n<p>Alongside commercial and regulatory requirements, the structure of an AIF is influenced by both the tax profile of the target investments and the tax attributes of the investor base. In practice, AIFs may look to establish both a unit trust and limited partnership structure to provide flexibility.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rights do investors typically have and what restrictions are investors typically subject to with respect to the management or operations of the Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The specific rights and restrictions of investors are set out in the AIF\u2019s fund documents (constituent document and offer document) (<strong>Fund Documents<\/strong>) and side letter (if applicable).<\/p>\n<p>Investors in AIFs generally have economic and governance-related rights, including rights to distributions from the AIF, reports in relation to their interest in the AIF, and voting on certain matters (e.g., winding-up the AIF, removing\/replacing the trustee\/RE\/general partner or changing the constituent document). However, investors in an AIF do not have day-to-day control over the management of the AIF or participate in investment decisions regarding the AIF.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Where customization of Alternative Investment Funds is required by investors, what types of legal structures are most commonly used?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Where an investor requires certain things to be customised in relation to an AIF, the most common approaches include:<\/p>\n<ul>\n<li>A side letter between the investor and the trustee, RE or general partner (as applicable), and (in some instances) the manager \u2013 which will amend the relevant Fund Document in relation to that investor only<\/li>\n<li>A different class of units or interests being created in the AIF, with the relevant terms being covered in the Fund Documents<\/li>\n<li>The establishment of feeder funds or parallel fund structures to accommodate specific regulatory, tax or investment requirements of an investor<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are managers or advisers to Alternative Investment Funds required to be licensed, authorised or regulated by a regulatory body?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In order to provide investment management services, managers will need to do one of the following:<\/p>\n<ul>\n<li>Have their own AFSL (issued by ASIC). Importantly, the financial services and products provided by an Australian financial services (<strong>AFS<\/strong>) licensee are limited to those they are authorised to provide under their AFSL (commonly referred to as \u2018authorisations\u2019)<\/li>\n<li>Either:\n<ul>\n<li>Enter an arrangement with an AFS licensee, which allows the manager to provide those products or services under that AFSL<\/li>\n<li>Operate under another AFS licensing exemption or ASIC relief, which allows them to provide those products or services without having an AFSL<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>(either, an <strong>AFSL Exemption<\/strong>)<\/p>\n<p>provided the manager operates within the authorisations on the relevant AFSL or the conditions of the AFSL Exemption (as applicable).<\/p>\n<p>Generally, advisers to an AIF will also require an AFSL (or rely on an AFSL Exemption) as, if they provide financial product advice to the AIF or its underlying investments, this will usually amount to a regulated activity under the Corporations Act.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are Alternative Investment Funds themselves required to be licensed, authorised or regulated by a regulatory body?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>AIFs are generally not required to be separately licensed, authorised or regulated as:<\/p>\n<ul>\n<li>Registered and unregistered MISs do not have separate legal personality, so they are unable to hold an AFSL. However, a registered MIS will need to be registered with ASIC<\/li>\n<\/ul>\n<p>Limited partnerships are typically used as investment vehicles only, so they would generally not be doing anything that would require an AFSL. Separately, an ESVCLP and a VCLP will need to be registered as such with Innovation and Science Australia in order to be an ESVCLP or VCLP (as applicable) under the <em>Venture Capital Act 2002 <\/em>(Cth.)<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the Alternative Investment Fund require a manager or advisor to be domiciled in the same jurisdiction as the Alternative Investment Fund itself?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No \u2013 it is quite common for a foreign manager or adviser to establish an AIF in Australia, but they perform the relevant activities in relation to that AIF outside Australia.<\/p>\n<p>However, where a manager or adviser is located outside Australia and they provide their services to an AIF from outside Australia, they may be able to rely on Australia\u2019s foreign financial service provider (<strong>FFSP<\/strong>) regime (which is a form of AFSL Exemption) (<strong>FFSP Exemption<\/strong>). From 8 April 2027, there will be new FFSP Exemptions available in Australia, which replace the existing FFSP regime. Please refer to our response to 2.7 for further information regarding the FFSP Exemptions.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there local residence or other local qualification or substance requirements for the Alternative Investment Fund and\/or the manager and\/or the advisor to the fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Generally, an AIF that is a registered or unregistered MIS will have an Australian resident RE or trustee (as applicable), but they can delegate the performance of various activities (e.g., investment management or administration) to external service providers who do not need to be domiciled in Australia.<\/p>\n<p>However, in relation to the qualification and substance requirements:<\/p>\n<ul>\n<li>A registered MIS\u2019s Trust Deed will need to meet specific content requirements in the Corporations Act, have an RE appointed, and the MIS must be registered with ASIC<\/li>\n<li>If a limited partnership will be an ESVCLP or VCLP, it will need to be registered with Innovation and Science Australia in order to be an ESVCLP or VCLP (respectively)<\/li>\n<\/ul>\n<p>Please refer to our response to 2.3 and 2.7 in relation to the local residence and qualification requirements (respectively) for managers and advisers of an Australian AIF. However, there are generally no explicit local substance requirements for AIF managers or advisers.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What service providers are required by applicable law and regulation?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In order to satisfy the applicable legal requirements, the following service providers must be appointed in relation to the stated AIFs:<\/p>\n<ul>\n<li><strong>Registered MIS \u2013 <\/strong>an RE and an external auditor must be appointed to a registered MIS under the Corporations Act<\/li>\n<li><strong>Unregistered MIS \u2013<\/strong> a trustee must be appointed to an unregistered MIS \u2013 as the MIS itself does not have separate legal personality, so everything needs to be performed by (or through) the trustee<\/li>\n<li><strong>ESVCLP\/VCLP \u2013<\/strong> a general partner must be appointed to these types of AIFs, as the general partner is responsible for operating these vehicles and applying for registration with Innovation and Science Australia<\/li>\n<\/ul>\n<p>In practice, AIFs commonly appoint external fund administrators, custodians and managers. While these appointments are not required by law, and the RE\/trustee\/general partner (as applicable) and manager can be the same entity, such appointments are consistent with market practice, and it is common for the RE\/trustee\/general partner to be a separate entity to the manager.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are local resident directors \/ trustees required?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no explicit legislative requirement for the trustee of an MIS, or the directors of that trustee, to be domiciled in Australia. However, it is highly unlikely that a foreign trustee or trustee directors would be feasible for the following reasons:<\/p>\n<ul>\n<li>Their limited ability to monitor the MIS in real time due to time differences<\/li>\n<li>If the trustee has an AFSL, ASIC may have concerns about the trustee\u2019s and the directors\u2019 ability to properly supervise the financial services that are being provided<\/li>\n<li>It may give rise to tax issues. For example, if the unregistered MIS is a managed investment trust from an Australian tax perspective, the trustee must be an Australian resident, or the central management and control of the MIS must be in Australia<\/li>\n<\/ul>\n<p>Similarly, the general partner of an ESVCLP or VCLP does not need to be domiciled in Australia, and may be domiciled in a foreign country in which an applicable double tax agreement is in force. However, the requirements for the directors of the general partner will depend on the type of entity that is used to be the general partner. That said, if the foreign general partner has an AFSL, ASIC is likely to have concerns similar to those outlined above in relation to a trustee of an unregistered MIS, and tax issues may arise if the general partner and\/or its directors are foreign residents.<\/p>\n<p>However, where the AIF is a registered MIS, it must have an RE that is an Australian public company with an AFSL that authorises it to operate a registered MIS. As a public company, at least two directors of the RE must ordinarily reside in Australia.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rules apply to foreign managers or advisers wishing to manage, advise, or otherwise operate funds domiciled in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Generally, a foreign manager or adviser will need to operate under an AFSL or an AFSL Exemption if it wishes to manage, advise or operate an AIF. In doing so, they will need to (among other things) adhere to Chapter 7 of the Corporations Act and the associated regulations if they are an AFS licensee (or the conditions applicable to the AFSL Exemption), ASIC regulatory guides and instruments and the AIF\u2019s Fund Documents.<\/p>\n<p>As mentioned in our response to 2.3, there will be a new FFSP regime in Australia from 8 April 2027. Under this new regime, two of the FFSP Exemptions that are likely to prove to be popular among FFSPs include:<\/p>\n<ul>\n<li><strong>The \u2018professional investor exemption\u2019 \u2013<\/strong> where the FFSP is providing financial services exclusively to professional investors (which are a category of Wholesale Clients, and include certain AFSL holders and trustees of superannuation funds with over A$10 million in net assets), and such services are provided predominantly from outside Australia (representatives of the FFSP can provide financial services from within Australia for up to 28 days per financial year \u2013 e.g., as part of marketing visits)<\/li>\n<li><strong>The \u2018comparable regulator exemption\u2019 \u2013 <\/strong>where the FFSP is providing financial services to Wholesale Clients only, the FFSP is authorised (e.g., via a financial services licence or registration) to legally provide the same (or substantially similar) financial services in a \u2018comparable jurisdiction\u2019, and the FFSP\u2019s relevant authorisation is administered by a \u2018comparable regulator\u2019. At this stage, the \u2018comparable jurisdictions\u2019 and \u2018comparable regulators\u2019 have not been specified, but are likely to include those that are part of the existing \u2018sufficient equivalence regime\u2019 in Australia (e.g., the USA and the Securities and Exchange Commission, the United Kingdom and the Financial Conduct Authority, and Singapore and the Monetary Authority of Singapore, to name a few)<\/li>\n<\/ul>\n<p>provided the FFSP can satisfy certain eligibility and ongoing conditions.\u00a0 \u00a0\u00a0\u00a0\u00a0<strong>\u00a0<\/strong><\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the common enforcement risks that managers face with respect to the management of their Alternative Investment Funds?\u00a0<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>As managers of an AIF often have limited (or no) interactions with AIF investors, it is rare for them to face legal action from those investors, unless, for example, they make a misleading or deceptive statement.<\/p>\n<p>However, as the trustee, RE or general partner will be the party who engages the manager via an IMA, the manager may face enforcement risk from that engaging party where the manager materially breaches the IMA.<\/p>\n<p>For registered MISs, the RE remains ultimately responsible for the operation of the AIF. While the RE may appoint agents or other persons to perform certain services in relation to a registered MIS (such as a manager), the Corporations Act provides that the RE remains liable to investors for the acts and omissions of such persons \u2013 as if those acts and omissions were that of the RE. Consequently, investors are more likely to pursue claims against the RE in these circumstances.<\/p>\n<p>From a regulatory perspective, the common enforcement risks a manager may face from ASIC include:<\/p>\n<ul>\n<li>Breaching its statutory obligations as an AFS licensee or the conditions applicable to the AFSL Exemption it is relying on, which can result in regulatory fines, loss or suspension of its AFSL, banning orders, or no longer being able to rely on the relevant AFSL Exemption<\/li>\n<li>Breaching the insider trading laws in the Corporations Act, which may result in regulatory fines and imprisonment<\/li>\n<li>Making misleading or deceptive statements (e.g., as part of marketing or offer documents), which often results in regulatory fines<\/li>\n<li>(through its directors) Breaching one or more directors\u2019 duties in the Corporations Act, which can result in regulatory fines, banning orders or imprisonment<\/li>\n<\/ul>\n<p>As digital assets are a relatively new asset class, and ASIC is less familiar with them, AIFs that invest in digital assets may also face heightened regulatory scrutiny in relation to licensing, custody arrangements, disclosure practices and the legal characterisation of the digital asset products. Consequently, managers should carefully assess the application of the AFSL, consumer protection and anti-money laundering and counter-terrorism financing requirements to their activities.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the typical level of management fee paid? Does it vary by asset type?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Management fees generally range from 0.10% to 2.00% per annum of the NAV of the AIF (or class within the AIF), and will vary based on whether the fund is passively or actively managed (AIFs are typically the latter) and can vary by asset\/fund type. For example, hedge funds and private equity funds may not have a high management fee, but may have a large performance fee or entitlement to carried interest (respectively).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is a performance fee or carried interest typical? If so, does it commonly include a \u201chigh water mark\u201d, \u201churdle\u201d, \u201cwater-fall\u201d, \u201cpreferred return\u201d or other condition? If so, please explain.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Performance fees are quite common for infrastructure and hedge funds, which may be between 15 and 20% of the investment returns above a specified hurdle rate (which may be subject to a high water mark).<\/p>\n<p>However, private equity managers (through limited partnership or trust structures) will instead receive carried interest as part of the distribution waterfall in connection with the investments made by the AIF &#8211; i.e., carry is typically determined on a whole-of-fund basis, once the return thresholds are met. The carried interest is often between 20% and 30%, and is usually payable after investors have received their contributed capital back in full, and have received a specified investment return (preferred return or hurdle) which can be approximately 8%. The carried interest percentage may itself be subject to the ultimate internal rate of return generated by the AIF.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are fee discounts \/ fee rebates or other economic benefits for initial investors typical in raising assets for new fund launches?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Fee discounts, rebates or other economic incentives are commonly used for initial investors \u2013 via side letters \u2013 when raising capital for a new fund, but generally where the AIF is only available to Wholesale Clients. It is also relatively common for early investors to invest in a founders\u2019 class in the AIF, which has a reduced management and\/or performance fee, but that class may have a lock-up period or other liquidity restrictions.<\/p>\n<p>Due to the regulatory restrictions imposed on REs (including needing to treat investors in the same class equally, and treating investors in different classes fairly), such arrangements are generally not made available to investors in a registered MIS.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are management fee \u201cbreak-points\u201d offered based on investment size?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Management fee break points may be offered to investors in AIFs, and are generally based on a sliding scale. However, such arrangements are more common for AIFs that only accept Wholesale Clients, and not very common for registered MISs.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are first loss programs used as a source of capital (i.e., a managed account into which the manager contributes approximately 10-20% of the account balance and the remainder is furnished by the investor)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>These programs are not common in Australia.<\/p>\n<p>However, managers may invest in the same AIFs as investors (or co-invest alongside those AIFs) where those AIFs only accept Wholesale Clients \u2013 as the REs of registered MISs have additional regulatory obligations in relation to conflicts of interest.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the typical terms of a seeding \/ acceleration program?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no \u2018typical terms\u2019 for investors who are seeding an AIF, and such terms will vary based on the commercial negotiations between the investors and the managers. However, some common examples include: discounted fees, first right of refusal over co-investment opportunities and profit sharing arrangements with the manager in relation to the fees received by the manager in relation to the AIF.<\/p>\n<p>As mentioned in our response to 3.3, founders\u2019 classes may also be established in AIFs, where early investors receive reduced fees in return for investing during the initial fundraising period (e.g., until that class reaches A$100 million in funds under management, or for the first 12 months after the AIF was established), but are subject to a lock-up period.<\/p>\n<p>For the reasons mentioned in our response to 3.3 and 3.5, these terms will generally not be offered in relation to registered MISs.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What industry trends have recently developed regarding management fees and incentive\/performance fees or carried interest? In particular, are there industry norms between primary funds and secondary funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is increasing downward pressure on fees charged by managers of AIFs due to:<\/p>\n<ul>\n<li>Increasing popularity of exchange-traded index funds with low fees (relative to investment performance)<\/li>\n<li>The extensive fee disclosure regime that applies to registered MISs and superannuation funds. For example, <em>ASIC\u2019s Regulatory Guide 97: Disclosing fees and costs in PDSs and periodic statements<\/em>, requires detailed disclosure of fees and costs in relation to registered MISs and superannuation funds, which are to incorporate the fees charged by underlying AIFs that the registered MIS or superannuation fund invests in. In addition, the Australian Prudential Regulation Authority (a key regulator of superannuation funds) collects extensive fees and costs data from superannuation fund trustees through its reporting framework, and uses that information in its supervisory and performance assessment activities. Consequently, superannuation fund trustees are known to pressure AIF managers to agree to lower fees<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What restrictions are there on marketing Alternative Investment Funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The key marketing restrictions for AIFs that only accept Wholesale Clients include:<\/p>\n<ul>\n<li>Ensuring that the AIF is not marketed to Retail Clients<\/li>\n<li>Marketing material being factually correct and not misleading or deceptive<\/li>\n<li>Ensuring that any past performance or forecasts in relation to an AIF are not misleading (which includes exercising caution in relation to the disclosure of investment performance of a similar AIF managed by the manager)<\/li>\n<\/ul>\n<p>However, AIFs that accept Retail Clients are subject to much more extensive marketing restrictions, which include ensuring that:<\/p>\n<ul>\n<li>The PDS for a registered MIS meets prescriptive content requirements<\/li>\n<li>The PDS and other disclosure documents for a registered MIS are provided to an investor at specified times (e.g., prior to the product being issued to an investor)<\/li>\n<li>A target market determination is in place for the AIF (which includes who the AIF is suitable for (<strong>Target Market<\/strong>) and how the AIF should be distributed), and the AIF is not distributed to Retail Clients outside the Target Market<\/li>\n<li>Specific warnings and disclaimers are included in marketing documentation for that AIF, and information regarding investment returns, features, benefits and risks are presented in a clear, balanced and prominent manner<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the concept of \u201cpre-marketing\u201d (or equivalent) recognised in your jurisdiction? If so, how has it been defined (by law and\/or practice)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The concept of \u201cpre-marketing\u201d is not formally recognised in Australia. Instead, the regulatory framework focuses on whether conduct constitutes the provision of a financial service or product. However, the manager must ensure that any information they provide as part of their \u201cpre-marketing\u201d is not misleading or deceptive.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can Alternative Investment Funds be marketed to retail investors?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. However, the regulatory framework in relation to Retail Clients is stricter and more prescriptive than the regulatory framework applicable to Wholesale Clients. Please refer to our response to 4.1 for further information.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does your jurisdiction have a particular form of Alternative Investment Fund be that can be marketed to retail investors (e.g. a Long-Term Investment Fund or Non-UCITS Retail Scheme)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The primary type of AIF that is marketed to Retail Clients is a registered MIS. Please refer to our responses to 1.1, 1.4, 2.5 and 2.6 for further information in relation to registered MISs.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the minimum investor qualification requirements for an Alternative Investment Fund? Does this vary by asset class (e.g. hedge vs. private equity)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no minimum investor qualification requirements for an AIF, but eligibility to invest in an AIF may be based on whether the investor is a Retail or Wholesale Client.<\/p>\n<p>Under the Corporations Act, a person will be considered a Retail Client, unless they are a Wholesale Client. Common categories of Wholesale Clients include:<\/p>\n<ul>\n<li>An individual who is at least 18 years old and either:\n<ul>\n<li>Invests A$500,000 or more in an AIF<\/li>\n<li>Provides a valid certificate from a qualified accountant that states they have net assets of at least A$2.5 million, or a gross income of at least A$250,000 for each of the last two financial years<\/li>\n<\/ul>\n<\/li>\n<li>Professional investors (including the holder of an AFSL, a person who controls more than A$10 million or a person that is a listed entity or a related body corporate of a listed entity)<\/li>\n<\/ul>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there additional restrictions on marketing to government entities or similar investors (e.g. sovereign wealth funds) or pension funds or insurance company investors?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions on the use of intermediaries to assist in the fundraising process?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No. However, an intermediary would need to have its own AFSL with the relevant authorisations (e.g., in relation to providing financial product advice and dealing in a financial product), or be operating under an AFSL Exemption. There should also be an agreement with the intermediary, which makes the intermediary\u2019s obligations clear, specifies the services to be provided by the intermediary (including whether they are to assist in preparing any marketing and disclosure documents), and how the intermediary is to be paid for their services.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the use of \u201cside letters\u201d restricted?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Due to the regulatory restrictions that REs face (including those mentioned in our response to 3.3 above), side letters are typically not used for registered MISs. However, side letters can be quite common for AIFs that only accept Wholesale Clients, provided the constituent document for the AIF permits the use of side letters and the terms of the side letter are consistent with any other obligations of the trustee or manager. For example, a trustee of an unregistered MIS has a common law duty to act in the best interests of the investors in that unregistered MIS as a whole, so the trustee would need to determine whether the side letter terms are consistent with this duty before they are offered.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any disclosure requirements with respect to side letters?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No, provided the relevant Fund Documents do not require the trustee, manager or general partner (as applicable) to disclose specific side letter terms to investors. However, it is best practice to state in the AIF\u2019s PDS or IM whether side letters will be offered to investors, the circumstances in which they may be offered and what kinds of terms (at a high-level) will be in those side letters.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the most common side letter terms? What industry trends have recently developed regarding side letter terms?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The most common side letter terms for an investor include:<\/p>\n<ul>\n<li>Fee discounts\/rebates<\/li>\n<li>Additional reporting to the investor (e.g., so they can adhere to particular regulatory obligations)<\/li>\n<li>Rights to participate in co-investments<\/li>\n<li>Most favoured nation provisions (which specify when other investors may receive more favourable side letter terms)<\/li>\n<li>Sharing of confidential information within the investor\u2019s corporate group<\/li>\n<li>Additional investments in the AIF (where capacity may be restricted)<\/li>\n<li>Tax-related provisions (e.g., ensuring that the investment is managed in a way that preserves the treatment upon which the investment was made)<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">6269<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/148416","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=148416"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}