March 12, 2020
Chris Caparelli has spoken with Inframation News on various topics surrounding foreign investment in the United States.
The in-depth piece by Inframation News unpacks FIRRMA and the updates to it proposed by CFIUS which took effect in February.
Chris commented on investment firms’ principal place of residence as they seek clarity in order to avoid a CFIUS review. It’s currently defined as the “primary location where an entity’s management directs, controls, or coordinates the entity’s activities”. The piece continues saying “a firm whose investment team is in New York but is officially registered in another country is now considered a U.S. investor”.
“Even if they have a GP set up in the Caymans, they will still be considered having their principal place of business in the U.S.,” Chris told the publication.
Chris also comments on how infrastructure duns have seen their LP base scrutinized by CFIUS.
An excerpt from the piece is below.
With the law now encompassing non-control transactions, GPs with a signiﬁcant share of foreign LPs could increasingly need CFIUS approval. A fund based in the U.S. with a signiﬁcant percentage of foreign LP capital could be considered a foreign fund. Fund managers may take steps to isolate LPs from non-exempt countries, Caparelli says.
“If you have a foreign LP, say from France, which is not an excepted country, the GP may want the discretion to exclude that French LP from a U.S. investment that would otherwise make the transaction subject to CFIUS," he says. “It's not just the funds that are weighing such considerations. I think in a lot of cases the foreign investors also want to have their investment tailored in a way that they are not putting the fund's investments into CFIUS jurisdiction unintentionally.”
Subscribers can access the full article through Inframation News.