Oh my! I was not aware of this PFIC issue. I think this deserves further examination and analysis for US persons interested in the topic. Do we collectively know whether various funds are eligible for QEF (Qualified Electing Fund) treatment?
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VC funds in the US typically charge or keep 2% of the fund value for themselves each year. And most VC funds have a 10 year life. Therefore, if a VC raises say $100M, they will reserve $20M for their management fees. This means that the total they commit to invest is only $80M. Then, on top of that, they take 20% of any exits, even if the exit is a partial loss. The model is quite standard. Also, even the best VC funds have a 1 in 12 exit. I think my odds are better at a BlackJack table.
CAVEAT: I AM NOT YOUR TAX PROFESSIONAL.
@didier.moretti No fund is automatically QEF. You have to specifically file a form with the IRS electing QEF treatment in the year you make the investment. Then the fund has to send you a special income statement (call it the equiv of a sched K-1) which you then have to translate into your form 8621.
Itās been suggested to me that the correct thing to do is hire an accountant/lawyer who knows what they are doing as you do not want to do this yourself in any event. Iāve done enough foreign stuff that I would agree with that statement, but thatās me, and I also have not looked at 8621 yet either (because Iām not that worried about it because I have an accountant familiar with international issues on speed dial).
Bluecrow says they will provide the PFIC statement, therefore you can make the QEF election. I imagine most of these funds will.
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I have passed PT. After reviewing their MR, I have to admit itās a purse risk based VCs, which is not as conservative as they said.
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Mercanās Lapa hotel project is still on my list. They said they will send me the preferred law firm info. Would check and share what I get.
It is a little plug and play but their actual costs vary widely. After talking with 6-8 lawyers, we went with a full service place called Global Citizen, who works with a well known law firm. We liked that one arm dealt with GV issues and one arm worked the legal aspects. And their price was, while not the lowest, close to it.
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Yes, it make sense. Comparing with investment amount, I donāt think legal fee is a big deal. Shall I know if the lawyer would cover the GV application and legal assessment on investment project?
Hello everyone!
Finally made it to the bottom of the thread and great thanks to all of those who contributed.
Unfortunately found the comparison table only after I did one myself today, but basically itās all the same and nothing more to add.
A bit of background: Iāve been working in a RE investment company for the past 8 years as an investment analyst/advisor and have seen all sorts of f*ck-ups along the way (ie any development / re-development cycle) and therefore would only look at something that either already exists and generates a cash flow or something bullet-proof as gov bonds mixed with something more opportunistic (in terms of fundās underlying assets).
Given this I was interested in the New Edge fund, but having read @pigletjulia posts it feels Iāve missed something (tbh I just came over it yesterday, so didnāt have time to dig into detail, only checked the ppt and their website).
Waiting for the fundās representative to schedule a call to get more details but any further thoughts on this fund would be greatly appreciated!
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My advisors had a good idea today since we like several funds - split the investment! Another way to diversify. You have to invest a total of 350k, and not every fund allows a lower investment but many do allow as low as 50k. Just an idea for people to consider.
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now thatās an interesting idea. this is GCS thatās advising you? I wonder if that creates more headache.
If you can get someone to clarify what the return profile is for new edge, thatād be great. What I see in the PPT just makes no damn sense to me - itās limited upside and all downside.
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when I talked to Mercan yesterday, I am told to be carefully with fund investment. Based on their info from mkt, only a few investors(20-30 people)got GV approval. the key issue is you donāt really know if the fundsā investment policy would meet SEFās criteria. I cannot judge if the info is true or not , but it echoes my thoughts based on my research recently. Given fund option was only allowed two yrs ago, such investment approach has yet established a comprehensive proof re GV application.
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Hi Alex:
Thanks for ur sharing.
New Edge is still remained on my list but under key condition: If Quadrantis Capital keeps their investment policy and asset allocation as the same as what they said on Presentation, the portfolio of New Edge fund looks pretty good on risk control. However, the tricky one is I donāt find any words on concrete asset allocation, say 40% JPM Gov bond+60% Square CAPC Asset Fund etc on its Management Regulation. In addition, up to 80% leverage is remained as another potential risk. I asked one sales person from an agent for further clarification, and just got the answer that Quadrantis Capital would do their best to maintain their name on the mkt and they donāt go high leverage rate in practice. I dropped a note to Quadrantis for directly checking but have yet got reply.
If you do have any new info, happy to discuss.
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This is simply not true. It seems to me that they will tell you anything to (1) make you choose the real estate route and (2) invest with them.
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yeah, probably itās not true. However, itās really not easy for investors to pick up a reliable one cos most of VCs have no track record at all.
Should you maybe look at track record from the assets they manage personally and privately rather than the fund level? We have assets that we manage that provides returns to our private investors and now we will shortly at the fund level.
Conceptually thatās a great idea, but it seems like in practice itās not that simple - for fund managers like Lince, sure. For someone like Bluecrow thatās primarily an asset manager, youāre talking about coughing up portfolio information on private clientsā accounts; even if itās generally anonymous, (a) you have no way to validate it (b) Iād assume that falls afoul of some sort of privacy law?
not in that business so I donāt know.
yes, from legal perspectives, all investors should and have to rely on information disclosure from these funds, such as Presentation, Management Regulation and annual reports etc.
I have been evaluating various funds and have found Rock Capital and Blue Crow interesting. However, in case of Blue crow, I am worried that the NAV is Euro 7500 which means that I would be paying 50% extra compared to initial investors. My question to the group is that - will this high NAV impact my returns in any way? Does it make sense to enter the fund at this high NAV? 50% increase in NAV in an yearās time seems like inflated valuation of underlying properties.
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Very helpful additions! Agreed about the lack of information compared to US (or Cayman based) funds. That appears to just be the nature of the animal here, although I do know that the two ātrueā VC funds seem to be much more forthcoming in terms of the information that they provide.