In the parallel structure of the AIV, the main fund invests directly in the operational LLC and the sponsors who have opted for the parallel AIV choose not to invest directly in the direct investments of the main fund. Therefore, the Fund`s partnership agreement should have optout mechanisms, so that allocations, distributions and other economic provisions result in some investors participating only through the parallel VIA. In particular, the rules for awarding the Fund`s partnership agreement should help allocate revenues from the operational LLC, which will generally represent UBTI and ECI, specifically to only partners who did not participate in the parallel VIA16. base. Yes, for example. B, there are aggregate losses in the main fund and a profit in a parallel AIV (or vice versa), specific adjustments must be made. Depending on the date of the Fund`s cash flow, it may therefore be impossible to implement the opt-out to perfection. Many funds are needed as part of their partnership agreements to minimize access to UBTI and ECI. Even funds in the absence of such contractual restrictions (or funds that are explicitly able to invest a portion of their capital commitments in UBTI or ECI investments) will often attempt to minimize UBTI and eCI by recognizing the negative effects on their exempt and non-exempt investments in the United States. Commandos. Therefore, private foundation investors should ensure that excess holdings in the fund`s partnership agreement (or in their partnership letter) apply to parallel IVAs and the fund itself.
Private foundations that invest in a fund without contractual protection (and instead rely on holding less than 20% of the fund) should be cautious, as they could ultimately hold more than 20% of a parallel IVA created by the Fund, particularly when the fund has little tax-exempt funds or does not participate in the United States. Investors. In recent years, many private equity funds have been able, as part of their partnership agreements, to create “alternative investment vehicles” to facilitate one or more specific investments. As a general rule, a fund is authorized to create an AIV to address the “tax, legal or regulatory” concerns of a partner or the company as a whole. A fund`s partnership agreement generally requires that the terms of the AIV be “substantially identical” to the terms of the Fund`s partnership agreement, unless necessary to meet the tax, legal or regulatory objective for which the AIV was created. The Fund`s partnership agreement may also require that the profitability of the AIV and the Fund – including management fees, endowments, distributions and the counterparty partner`s recovery system – be coordinated and, if necessary, adapted to implement the parties` overall economic regime. Where a complementary agreement is reached for additional work approved in accordance with rpo-fits-all A.III and A.IV points of RpD Appendix V (B), it should be treated as a separate contract to make further changes to this additional work and, if necessary, the authorities` timetable for amending the contract covered in point A.I. should also apply.