3.6 Legal structure and domicile for a variety of SIFs

uS state of Delaware), which gives benefits like limited liability to investors. Established structures, such as trusts, limited partnerships, or corporations, also help provide some assurance that the SIF will be independent from political pressures (see table 3.6 for legal structures used by mixed capital SIFs).

Although the limited partnership structure is most commonly used among private equity funds globally, government sponsors of SIFs may resist the structural relegation to passive investors in such a model. Typically, the general partner (gP) / limited partner (LP) structure seeks to align the interests of the manager and the investors (see box 3.4). The fundamental characteristic of the gP/LP model is that the gP has more control, whereas the LP is a passive investor relying on the professional management expertise of the gP. In the case of SIFs, for which the public sector sponsor defines the strategic direction of the fund and provides the anchor capital to invest in a double bottom line strategy, giving up management control may be challenging (see chapter 4 for more detailed discussion on this topic).

Despite the risk that the public sector sponsor has less control in certain fund structures, it is important to bear in mind that there are greater hazards if the public sector sponsor adopts structures by which it can seize more control of the fund. Political interference, whether perceived or otherwise, from the public sector LP may sully the reputation of the fund, and both professional managers and potential co-investors may hesitate to participate. Other legal structures may not give the public sponsor limited liability as effectively as the limited partnership model does. A compromise is for the government sponsor to be represented in the advisory committee—built into the governance structure of the limited partnership model—to steer the strategic direction of the SIF (see chapter 4).

TABLE 3.6 Legal structure and domicile for a variety of SIFs

SIF OWNERSHIP LEGAL STRUCTURE DOMICILE

Asia Climate Partners

Marguerite II Mixed Exempted Limited Partnership Law (2018 Revision)

Mixed Luxembourg special partnership, or Societé en Commandite Spéciale (SCSp),a under Luxembourg Law of August 10, 1915, on commercial companies (Company Law) Offshore (Cayman Islands) Offshore (Luxembourg)

Ghana Infrastructure Investment Fund Public Statutory corporation (body corporate) Domestic National Infrastructure Investment Funds (India) Mixed Trust, under Indian Trusts Act, 1882 Domestic

Ireland Strategic Investment Fund

Public No legal entity Khazanah Nasional Berhad (Malaysia) Public Public limited company, under Malaysian Companies Act, 1965 Domestic

Domestic

Nigeria Sovereign Investment Authority Public Statutory corporation (body corporate) Domestic FONSIS (Senegal) Public Limited liability company, under OHADA Domestic frameworkb

Palestine Investment Fund (West Bank and Gaza) Public Public shareholder company under Companies Law No. 12 of 1964 Domestic

Sources: World Bank (see case studies in appendix A); fund websites; available public documents. Note: FONSIS = Fonds Souverain d’Investissements Stratégiques (Sovereign Fund for Strategic Investments); OHADA = Organisation pour l’harmonisation en Afrique du drout des affaires (Organization for the Harmonization of Corporate Law in Africa); SIF = strategic investment fund. a. The SCSp was introduced in Luxembourg in 2013. 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. b. Acte Uniforme Révis Relatif au Droit des Socit Commerciales et du Groupement d’Intrêt Économique, 2014.