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Getting the fund right

SJ Berwin's Jonathan Blake and his private equity team talk about private equity fund-raising and fund structures in today's environment

2001 has already offered a number of important themes to the private equity industry in Europe but perhaps one of the most significant is how the private equity fund raising landscape has changed.

With recent figures confirming that volatility in several key sectors as well as in key public equity markets has had a significant impact on many funds' performance, investors are looking all the more closely at what funds they should be investing in. This is not just a question of performance, it is also to do with the fund structure.

That said, it's clear that another key trend is the continuing growth in number and diversity of institutions and individuals looking at investing in private equity. There are a growing number of institutions from key investment groups across Europe – such as insurance companies and pension funds – keen to allocate a portion of their investment capital to this asset class.

There are also a growing number of individual investors – beyond the business angel and the high net worth individual accustomed to proactively investing their investment capital – who want to invest in private equity. Again, both performance and structure are critical factors – with many novice investors wanting to invest in funds with the right performance and the right structure.

The structuring of multi-jurisdiction funds and achieving full regulatory compliance, how best to maximise a fund's tax efficiency, the fee mechanisms involved – carried interest clauses perhaps inevitably attracting closest scrutiny – are all fundamental issues when planning a private equity fund.

PrivateEquityOnline therefore sat down with one of the leading private equity legal practices in Europe, SJ Berwin, to have members of their team provide more detail and insight how best private equity funds be structured, and how they view the fund-raising landscape at present.

We first talked to Jonathan Blake, Partner and head of the Private Equity Group at the firm to have him update us on what the most common sources of funds have been and what typical fund structures have been deployed.

We then had Josyane Gold, another Partner in the Private Equity Group, give a more detailed view on fund structures. What impact has a tougher fund raising market had on terms and conditions – and what about carried interest policy? How has that changed?

Next Tamasin Little, a Partner in the Financial Services Group, told us what particularly caught her eye in the Myners Report in connection with pension funds' ability to invest in private equity. And then Tony Tulloch, a Partner from the firm's Frankfurt office, provided a German perspective: how is fund raising undertaken in Germany and which institutions there are evidencing real interest in the asset class?