International Investors

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Primer

As funds succeed, grow, and network across a larger base of potential investors, they often run across international capital opportunities, which can seem attractive. However, fund managers should understand that taking on international capital comes at a cost - (1) legal and regulatory complexity; and accordingly, (2) cost.

Generally, similar to how the United States has the Securities Act of 1933 (the "Securities Act"), which applies in almost all cases where a fund brings on an investor - technically, the sale of a security to that investor - other jurisdictions have their own equivalents. While selling securities in the US on a private placement basis is generally simple via the 506(b) or 506(c) safe harbor and unified across states when utilizing the aforementioned, unfortunately, the complexity of selling to international investors can scale exponentially.

The United States is generally considered a favorable and relatively easy place to sell securities. The standards with regards to investor net worth and what filings, fees, and processes must be followed are quite straightforward.

On the other hand, how things work in the US are by no means the case for any given international jursidiction, which may have differing standards for who can invest, what licenses or processes must be followed, applications that must be completed, fees that are levied unto the fund, and intermediary parties which must be involved.