Case Study—The Marguerite Fund: An Infrastructure Fund Sponsored by Development Banks
TABLE 11.3
Summary of Marguerite II’s core bodies and functions
GOVERNANCE BODIES
FUNCTIONS
Limited partners (LPs)
• I nclude the European Investment Bank (EIB) and other investors in Marguerite II • Make decisions via investor vote on fundamental matters such as the appointment or removal of the fund manager
Marguerite Adviser
• Controlled by four senior members of the investment team • Owns MIM and provides advisory services to Marguerite II and MIM
Marguerite Investment Management (MIM)
• I s an external alternative investment fund manager licensed under Luxembourg law, and fully controlled (via Marguerite Adviser) by the four senior members of the investment team (CEO, CFO, and two others) • Has overall responsibility for management, including investment decisions and administration of the fund, together with the Marguerite II general partner, and assisted by Marguerite Adviser • Has sole authority for portfolio management, investing, and risk management • Has ownership interest in Marguerite II through capital contributions by senior investment professionals
Investment Committee of MIM
• I ncludes the four partners of MIM and three independent members (all former CEOs from the power, utilities, and airport sectors) • Makes investment and divestment decisions by a majority, with MIM partners having, in effect, the ability to independently approve investments, subject to compliance with the eligibility criteria
Strategic Committee
• • • •
Advisory Committee
• Includes representatives of the sponsors • Does not take part in any investment decision • Is responsible for granting approvals stipulated in the limited partnership agreement (for example, for investments exceeding certain thresholds or clearing conflicts)
I ncludes senior representatives of the sponsors Does not take part in any investment decision Approves any material amendment to the strategic orientation of Marguerite II Provides strategic consultation on the overall development of, and on key decisions relating to, the strategy of Marguerite II
Source: Marguerite management. Note: CEO = chief executive officer; CFO = chief financial officer.
three independent members selected by the sponsors and coming from the private sector. Investment decisions were made by majority, although in practice unanimity was sought. To reflect more standard fund industry practices in the European Union, and to facilitate fundraising from institutional investors, Marguerite II was set up as a Luxembourg special limited partnership (SCSp), a legal structure that has gained widespread acceptance for private equity and infrastructure funds (see box 11.1). The SCSp was introduced in Luxembourg in 2013, and more than 1,300 such partnerships were set up in the initial three years (PwC 2016). The SCSp is a variation of the long-established, standard Luxembourg partnership (société en commandite simple, or SCS), the difference being that the SCSp does not have a legal personality separate from those of its partners and, as a result, can be structured more flexibly. The main advantages of the new structure used for Marguerite II are (1) the direct participation of the most senior investment professionals in fund results via their stakes in the GP, (2) the licensing of the fund management company as an external alternative investment fund manager under Luxembourg law, and (3) an expansion of the investment committee, resulting in the investment team having a clear majority in investment decisions. These changes ensure that the investment team has full independence in making investment decisions (within the eligibility criteria), skin in the game when it comes to fund performance, and a widely accepted legal accreditation.
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