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SUPPORTING THE EVOLVING NEEDS OF YOUR FUND

EMERGING MANAGER PLATFORM

Anchin has a long history of serving the hedge, private equity, real estate and venture capital fund industries. We have assisted many funds through every phase of business - from start-up through winding down. We enjoy helping start-up funds launch and pride ourselves on growing with them through subsequent fund launches and additional capital raises.

Our Focus on Emerging Managers

Launching a new fund can be complex, expensive and extremely competitive. As a start-up fund manager, your attention should be focused on formalizing a compelling investment proposition, building a team, raising capital and meeting return objectives. During the launch process, you may encounter many unfamiliar challenges, including managing risks, navigating complex regulatory environments and compliance considerations. This is where Anchin can make a difference. We understand the issues an emerging manager faces during the funds early stages and can develop tailored solutions to meet your needs.

Our Emerging Manager Platform team will work with you and your fund to identify and help you navigate the complexities of regulations and align your business and tax strategies while offering traditional services like audit, tax compliance and fund structuring at fees that are commensurate with your fund’s growth.

How Anchin Can Help

  • Advisory services that go beyond traditional tax and audit compliance, including fund modeling, formation and structuring
  • Performance record verification
  • Management Company & General Partnership tax structuring
  • Compensation tax structuring
  • Fund document review including regulatory registration and offshore jurisdiction
  • Referrals to attorneys, fund administrators and other service providers
  • International tax planning
  • Preparation of tax returns and Schedule K-1s
  • Selection of basis of accounting and level of attest service for financial reporting purposes
  • Audit of year-end financial statements
  • Bookkeeping and administration services

Why Partner With Anchin?

  • We have built a distinct culture where our Emerging Manager Platform team think and act like business owners.
  • We understand the complexities and compliance burdens for start-up fund managers and are here to assist you along the way, as often and when needed.
  • We understand your sensitivity to costs in the early stages of your business and view this as an opportunity to grow with you.

Pre-Launch Services

  • Tax structuring advice
  • Initial fund document review
  • Referrals to attorneys, administrators and other service providers

Post-Launch Services

  • External Financial Statement Audit
  • Tax Compliance (Partnership returns and Schedule K-1s)

Value-Added Services

  • Performance record verification
  • Tax planning across your funds, portfolio companies, joint ventures, advisors and principals
  • Audits of portfolio companies
  • Valuation policy and procedures assistance
  • Reporting and accounting advisory services
  • Process design and improvement
  • State and local tax planning
  • Bookkeeping services*
  • Valuations and appraisals*

* SEC and AICPA independence rules permitting.

Early in the process of setting up your fund, you will need to make strategic and structuring decisions that will affect the fund long into its future. Starting your own fund is in many ways not that different from starting any other business. You’re going to need a business plan which, among other things, calculates expected cash flow and establishes your fund’s timeline, including the capital-raising period. A sound and well-thought-out business plan contains growth strategies, a marketing plan and a detailed executive summary with a conclusive section tying all of these areas together.

Anchin can be a trusted resource as you make these important decisions, providing you with the benefit of our experience in respect to key areas such as:

  • Setting up your fund structure (which is dependent on a number of tax, regulatory and financial considerations, usually driven by the tax needs of the investors)
  • Initial fund document review (while working with you and your legal advisors to address any relevant tax implications and tax reporting requirements)
  • Assisting you with choices relating to basis of accounting (GAAP, Income-Tax), accounting policy choices, valuation policies and other reporting and accounting advisory services
  • Investment Management Company and General Partner entity structuring
  • Business strategy and modeling, including waterfall distributions
  • Tax planning and tax compliance across your funds, portfolio companies, joint ventures, advisors and principals

Raising capital is difficult, and can be even more challenging for emerging managers, as investors are often hesitant to allocate capital to investment managers without a proven and verified performance record.

To alleviate investors’ reluctance, managers can prepare a summary of their historical performance. Choosing the correct report, with various levels of accountant’s assurance available, can be a daunting and difficult task.  Anchin can assist in selecting the most cost-effective report and provide attestation services on your historical performance. The performance record will include an independent accountant’s report, the performance record, whether in total or by asset, or both, along with supporting notes to provide the return calculation methodology and other information that may be relevant to potential investors. 

Read: Changes to Accounting Rules Provide Alternatives to Costly Performance Record Verifications

Designing an efficient tax structure that aligns your business and tax strategies is an important step in launching a fund. The fund structure you chose is largely determined by your investor base and investment strategy. After a tax structure is put in, there can be an overwhelming array of tax considerations that can have a widespread impact on investors and principals. 

Funds engage in transactions which may have significant tax consequences to its investors and managers. Reviewing the impact of these transactions before they happen can provide opportunities to structure the transaction in the most tax-efficient way possible. We assist with these analyses and advise the best next steps.

Anchin can help review potential acquisitions to ensure the optimal structure, including commenting on the draft documents. Upon an exit or refinancing, we can help with structuring to maximize the investors returns. 

We pride ourselves in planning ahead and can assist with common issues Funds may face, including:

  • Reviewing or assisting in designing structures to identify potential domestic and foreign tax issues for the fund, its investors and principals
  • Working with you and your lawyers in reviewing fund documents
  • Consulting and advising on entity classification and other tax elections.
  • Tax planning across your funds, portfolio companies, joint ventures, advisors and principals
  • Portfolio company acquisition and exit advice

Our expert tax partners use technical knowledge and industry knowledge, and their understanding of how decisions can have a long-term impact, to help clients manage their tax reporting requirements, including:

  • Preparation of the fund, portfolio company and general partner returns
  • U.S. filing requirements for offshore companies and investors in onshore and offshore investment vehicles

Investors and creditors are demanding more transparency from investment managers, often in the form of audited financial statements. Despite stakeholders taking comfort in the audited financial statements, we realize that financial statement audits are often a cost driver. As independent auditors, we perform an important role of being a trusted intermediary between fund managers, portfolio companies and stakeholders. 

How Anchin Can Help

  • As part of fund strategic planning, we can advise on the basis and frequency of reporting to determine the most cost-efficient reporting structure.
  • Our skilled and experienced audit professionals get the basics right and aim to add value beyond the financial statements through the business insights we bring to each engagement.
  • Our risk-based audit approach is based on a proven methodology and commitment to independence and ethical behavior.
  • We follow industry trends, issues and insights that may impact the accuracy and completeness of financial statements.

Our advice is clear, concise and relevant, driven by industry-best practices and technical research. 

Fund’s management is responsible for the preparation of the fund’s financial statements. Such financial statements can be prepared by either the fund manager’s accounting team or by an outside third party or a fund administrator. Emerging managers may not have the resources available to prepare a full set of financial statements and note disclosures. Historically, auditors have aided their clients in the preparation of the fund’s year-end financial statements.

Regulators have become and continue to increasingly scrutinize investment managers. Such scrutiny has translated into having a significant impact on the services that auditors of funds can provide to their clients. If the investment manager has registered with the SEC, the preparation of the fund’s financial statements by the auditor is a specifically prohibited, non-audit service pursuant to SEC’s independence rules.

Independence can be compromised, in fact or in appearance, if the auditor is recommending accounting policies, disclosures or drafting financial statements, and then issuing an opinion on their recommendations. 

It may be difficult to stay up to date on accounting and financial reporting standards and engaging a fund administrator may not be cost effective at every stage of the funds cycle, yet financial statements still have to be delivered to stakeholders. It is critical that whoever prepares the financial statements and disclosures and advises on accounting policies has robust knowledge of financial reporting standards to advise on requirements. 

 

News

  • Best Bosses 2021April 5, 2021

    MARC WIEDER & ROBERT GILMAN Anchin, Block & Anchin As partners and co-leaders of the real estate practice group at Anchin, Block & Anchin, Marc Wieder and Robert Gilman lead a 36-member team that represents some of the biggest players in commercial real estate on everything from transactional guidance and 1031 exchanges to advisory on tax strategy to cash flow analysis. The duo has an impressive reputation among both clients and colleagues.

  • QIP vs. Repair Regulations – Decisions, Decisions, Decisions…February 3, 2021

    Has your business been hit hard by the COVID-19 pandemic? While many business’s operations have been greatly affected by the pandemic, the good news is that much needed relief is now accessible to many. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020, providing widespread economic relief, including some significant tax law changes. The new CARES Act provision on qualified improvement property (QIP) tax treatment is particularly noteworthy for taxpayers in the real estate, restaurant, retail, and hospitality industries as these businesses have been hit hard by the COVID-19 pandemic.

  • What Does the New Stimulus Package Mean for Landlords? February 3, 2021

    The highly anticipated second stimulus relief package, released shortly before the holidays, on December 22, 2020, has a provision that will finally provide benefits to property owners.  

  • Changes to Accounting Rules Provide Alternatives to Costly Performance Record VerificationsFebruary 3, 2021

    Aspiring investment managers looking to raise capital often find a lack of a documented track record of past performance to be a roadblock.  However, with recent changes to accounting rules, investment managers may have caught a break. The Statement on Standards for Attestation Engagements No. 19 - Agreed-Upon Procedures Engagements (“AUP” or “SSAE 19”), issued in December 2019 may provide alternatives to performance record verifications that have previously been accomplished through costly examinations or Global Investment Performance Standards (GIPS) verifications. 

  • What do the “Final” Carried Interest Regulations Mean for You?January 26, 2021

    On January 7, 2021, the Internal Revenue Service (IRS) released final regulations (the Final Regulations) relating to the scope and applicability of Internal Revenue Code Section 1061. The Final Regulations retain the basic approach of the Proposed Regulations that were released on July 31, 2020, and published in the Federal Register on August 14, 2020, with certain significant changes. We previously discussed the Proposed Regulations in an earlier alert published here. This alert highlights certain changes made to the Proposed Regulations as well as certain provisions of the Proposed Regulations left unchanged in the Final Regulations.

  • The Private Equity Secondary Market – Has COVID-19 Created a New Buying Opportunity?December 10, 2020

    The typical way to invest in private equity is by investing when a fund initially raises capital. However, it is also possible to invest by taking over the position of an existing investor by purchasing the position on a secondary market. Under the right conditions, there can be significant advantages to investing through the secondary market - and the COVID-19 crisis may have created such an opportunity.

  • Anchin’s Financial Services Practice Awarded Best Accounting Firm for Start-Up & Emerging Funds by HedgeweekNovember 3, 2020

    “Anchin is truly honored to be chosen for this award,” said Jeffrey I. Rosenthal, CPA, Partner-In-Charge of the Firm’s Financial Services Practice. “Anchin prides itself on the excellent service and added value we provide to clients, and we are immensely proud to accept such awards which result directly from the efforts of our team.”

  • How COVID-19 Impacts Alternative Fund OperationsAugust 10, 2020

    COVID-19 has disrupted the alternative assets industry just as it has the rest of the world. Between high market volatility, spooked investors, travel restrictions and rapidly changing government regulation, it certainly is an unusual time to live and to operate in. How have fund managers changed their operations to respond? Preqin recently surveyed alternative fund managers to see what they are doing differently during the COVID-19 pandemic. The survey included hedge funds, private equity funds, venture capital funds, private debt and real estate investors from around the world.  Here are some key results.

  • Guidance on Cyber Threats to Private Equity and Hedge FundsJune 8, 2020

    As the corporate world is evolving and becoming more accepting of working remotely, every company is facing the increased threat of cybercrimes. In 2019, the average cost of a data breach in the U.S. was more than $8 million, and the average time spent to identify and contain a breach was around 245 days. These numbers will continue to grow as cyber criminals become even more sophisticated.

  • Important Changes From the CARES Act Provide Relief to the Real Estate IndustryApril 30, 2020

    The recently passed CARES Act repealed provisions of The Tax Cuts and Jobs Act (TCJA) of 2017 that eliminated the ability to carryback Net Operating Losses (NOLs) and also limited the use of an NOL carryforward to 80% of taxable income. This important change now allows for NOLs incurred in tax years 2018, 2019 and 2020 to be carried back 5 years allowing for tax refund claims.

  • Hedge Funds and Private Equity Firms Deemed Ineligible for PPP Loans by SBAApril 27, 2020

    The same day that legislation (April 24th) increasing funding by $310 billion for the Paycheck Protection Program (“PPP”) was signed into law, the Treasury Department issued a new Interim Final Rule.  This Final Rule clarified certain types of businesses that are eligible for PPP loans. Specifically, the Treasury has determined that hedge funds and private equity firms are ineligible businesses for purposes of PPP.

  • Are Real Estate Businesses Eligible to Participate in the Paycheck Protection Program (‘PPP Loans’)?April 6, 2020

    There is a concern that several types of real estate businesses considered “passive” under the SBA rules may not qualify without further clarification from the Treasury. Real estate management companies are not considered passive and are therefore eligible for PPP. 

  • Financial and Other Considerations When Starting a Private Equity or Venture Capital FundMay 9, 2019

    Getting a private equity or venture capital fund off the ground takes more than a successful investment strategy. From the outset, you need to consider and plan for the lifespan of the fund, from concept to realization and eventual liquidation. These funds are far more complex and require significantly more financial planning than a typical long-short equity fund.

  • Cybersecurity for Investment Partnerships, Private Equity and Real Estate Funds - Responding to a Growing ThreatJuly 30, 2018

    Investment partnerships, private equity and real estate funds are tempting targets for cybercriminals thanks to their financial assets, sensitive customer information, and access to institutional counterparts. And the threat is growing quickly. Recent studies report that fifty five percent of limited partners in private equity funds expect a serious cyberattack on their firms within the next five years. How can you keep your fund safe? Let’s take a look at the current threats and latest recommendations from the SEC.

  • Impact of the Recent Tax Reform on the Private Equity IndustryMay 15, 2018

    The Tax Cuts and Jobs Act (the “Tax Act”), which was signed into law on December 22, enacted a broad range of changes with most provisions taking effect for tax years beginning after December 31, 2017. This alert summarizes some of the key (federal) tax provisions of the Tax Act affecting the private equity industry.

  • Tax Cuts and Jobs Act: Key provisions affecting Hedge Funds, Private Equity Funds and Other Investment Funds or Fund VehiclesJanuary 17, 2018

    The Tax Cuts and Jobs Act (the “Tax Act”), which was signed into law on December 22, 2017, enacts a broad range of changes with most provisions taking effect for tax years beginning after December 31, 2017. This alert summarizes some of the key (federal) tax provisions of the Tax Act affecting managers of hedge funds, private equity funds and other investment funds or fund vehicles.

  • Tax Cuts and Jobs Act Offers Favorable Tax Breaks for Real Estate OwnersJanuary 3, 2018

    The Tax Cuts and Jobs Act (TCJA), which was signed into law on December 22, offers the real estate industry a treasure trove of tax breaks. Overall, most Real Estate companies and owners will come out ahead under the new tax law, but there are a number of tax breaks that were eliminated. Here are the most important changes in the new law that will impact the real estate industry.

  • Considerations for Starting a Private Equity Fund

    As private equity firms continue to succeed and become ever prevalent in the alternative investment space, more aspiring portfolio managers are joining the race to launch their own private equity fund. While today there are many successful and large private equity firms, many of the firms in this space are small-to-midsize shops with employees ranging from just a few to several hundred. The following summarizes several steps that managers should follow to launch a private equity fund.

  • Considerations for Starting a Real Estate Fund

    As real estate funds continue to succeed and become more prevalent in the alternative investment industry, and with more institutional investors increasing allocations to real estate, more aspiring portfolio managers are joining the race to launch their own real estate funds. While today there are many successful and large real estate funds, the majority of the firms in this space are small to midsize organizations with employees ranging from just a few to several hundred.

  • Considerations for Starting a Hedge Fund

    Hedge funds comprise the largest segment of the alternative asset market. With this status comes large profit potential. Many talented traders and investment professionals consider starting their own funds at some point during their careers. Launching a fund is not an easy or inexpensive undertaking, but it can be both personally and financially rewarding. Below, we guide you through some of the considerations and necessary steps to start your fund.

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