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Funds and Private Wealth insights from Brazil

24 October 2018

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At the end of September, our Brazil team led two breakfast discussions on global expansion, with a spotlight on funds and private wealth. Our panel of Intertrust experts from Brazil, the Bahamas, BVI and Cayman Islands were graciously joined by leading Brazilian investment fund and private wealth practitioners. Read on for key insights from each panel.

Alternative Investment Funds panel: Structuring Brazil funds for success

  • The panel and audience generally agreed that while the pace of regulatory reform has been challenging the changes are positive, improving upon existing framework and increasing transparency during the longest bull market in US history.
  • This period of low volatility is creating a difficult market for start-up managers to differentiate themselves from lower-cost, less actively managed investments. Existing large managers are more likely to have the necessary infrastructure and service provider contacts to manage and afford implementation.
  • It was noted that Cayman is a favoured jurisdiction due to the very fact that it is considered safe and well regulated. Cayman is at the vanguard of implementing new requirements and other jurisdictions will be following suit shortly; re-domiciling or establishing funds elsewhere for this reason alone was considered myopic.
  • The panel and audience agreed substance requirement headwinds would likely result in more back office functions performed locally. For example, Luxembourg’s keeping of accounting books and records is considered integral to substance and Ireland requires directors to be residents. Clarity on this subject will develop following the forthcoming Brazil elections when potential reforms will become known.

Click here for a detailed discussion summary, including panel responses to questions from the audience.

Private Wealth panel: Practical considerations for Brazil Private Wealth market participants

  • The panel emphasised that developing Controlled Foreign Corporations will steer action towards substance and the separation of assets. The panelists agreed that funds vehicles do possess both substance and separation due to governance and regulation, but at a higher cost.
  • Panelists advocated on behalf of trust structures as a way of ensuring your property remains available to your benefit should you become incapable of managing your own affairs during your lifetime. Trust structures offer flexibility, the avoidance of probate and the availability of assets upon death.
  • Having a Will is a straightforward and timely option in a standalone BVI or Bahamas company. Bahamas and BVI courts are obliged to rely on decisions made in the domicile of the deceased UBO—this process can take years, leaving the assets in limbo. A Will governed by Bahamian or BVI law can make securing a Grant of Probate relatively prompt.
  • The panel noted various options for creative fund solutions in the Bahamas, including SMART (Specific Mandate Alternative Regulatory Test) Funds, ICON (Investment Condominium), and approved funds.

Click here for more details on fund solutions and to learn more about Private Wealth considerations addressed in the panel.