AGEFI Luxembourg - avril 2024

AGEFI Luxembourg 32 Avril 2024 Fonds d’investissement Par Michael GEORGE, gérant du fonds ELTIF M&G Corporate Credit Opportunities chez M&G Investments D ans un contexte d'incerti- tude persistante autour des taux d'intérêt et de l'infla- tion, le crédit privé représente une source intéressante de revenus stables à taux variables et de rendements non corrélés. Le nouveau règlement ELTIF sera le fer de lance de la démocratisationdes stra- tégies demarchés privés enEurope, ayant le poten- tiel d'en élargir significative- ment l'accès. Lesmarchésprivésont connuune croissance significativedepuislacrisefinancièremondiale,mais sont restés historiquement la chasse gardée des investisseursinstitutionnels.Aujourd'hui,grâceàdes changements réglementaires favorables, tels que le Fonds européen d'investissement à long terme (ELTIF), les investisseurs individuels peuvent accé- der à ces opportunités et à leur potentiel de rende- ment ajusté au risque. Les ELTIF ont été créés pour encourager l'investisse- mentdansl'économieréelleeuropéenne,enorientant les capitaux vers les entreprises, les infrastructures et l'immobilier,toutenfavorisantladémocratisationdes actifs privés. Les décideurs politiques ont reconnu qu'il existait un déficit d'épargne pourlaretraiteenEuropeetdefinancement pour les entreprises : 99% d'entre elles sont des petites et moyennes entreprises, et alors qu'une croissance économique durable repose aussi bien sur le soutien aux entre- prises privées que publiques. ELTIF 2.0 : quels changements ? Lapremière versiona été introduite en 2015, mais son adoption a été lente en raison des exigences en matière d'investissement minimum. Une version révisée du cadre d'investissement - ELTIF 2.0, en vigueur depuis le 20 janvier 2024 - vise à renforcer l'attractivité des véhicules. Les principaux avantages restent inchan- gés : un accès réglementé aux actifs privés pour une base d'investisseurs plus large, un passeport de commercialisation de l'Union Européenne qui faci- lite sa diffusion, permettant ainsi une meilleure diversification des investisseurs, et un couple ren- dement/risque attractif. Lesmodificationsportentsurl'extensiondesactifséli- gibles et ladiminutionde leurpartminimaledans les portefeuilles,passantde70à55%,tandisquelesactifs cotés peuvent désormais représenter jusqu'à 45%du portefeuille. Enfin, l'allocation minimale initiale de 10.000 euros a été supprimée. Les changements por- tent également sur l'alignement des intérêts, avec la possibilitépourlegérantdeco-investiravecsesclients, ou encore une plus grande transparence des coûts. Selon nous, ELTIF 2.0 est un outil clé pour la démo- cratisation des stratégies de marchés privés en Europe, grâce a sonpotentiel pour en élargir signifi- cativement l'accès. Eneffet, les fondsde crédit privés ont généralement des montants d'investissement minimums de plusieursmillions d'euros, quand les ELTIF offrent un accès de zéro à quelques dizaines demilliers d'euros. Naviguer sur lesmarchés privés : l'importance de la sélectivité et de l'expérience La croissance significative duprivate equity au cours des dix dernières années et le fait que les entreprises restentprivéespluslongtempsontfaitévoluerlapro- fondeur et l'étendue du marché du crédit aux entre- prises, auparavant considéré comme un marché de niche. De plus, dans un contexte d'incertitude persis- tanteautourdestauxd'intérêtetdel'inflation,lesren- dementsgénérésparlecréditprivénedépendentpas de la dynamiquemacroéconomique à court terme. Parailleurs,lesportefeuillessontstructuréspourque les primes de rendement compensent le risque de crédit quelle que soit la phase du cycle économique. Cependant, bien que les rendements soient très attractifs, l'évolution rapide des taux d'intérêt se répercute directement sur les bilans des entreprises. Lesentrepriseslesplusfaibles,dontlesratiosdecou- verture des intérêts et les marges sont minces, vont probablement rencontrer des difficultés. Sélectivité et expérience sont donc primordiales pour aborder cemarché. De nouvelles poches d'opportunités à saisir Avecenviron16milliardsd'eurosd'actifssousgestion, lesELTIFn'ensontencorequ'àleursdébuts,maisl'op- portunité de croissance est immense.A titre de com- paraison, les encours des OPCVM s'élèvent à 13.000 milliards d'euros. Le désengagement des banques contribue particulièrement au développement des ELTIF. Les entreprises s'adressent désormais large- ment aux marchés des capitaux (publics ou privés) pour leurs besoins de financement. Si auxÉtats-Unis, cephénomènes'estaccéléréaucoursdesdixdernières années, il devrait en être demême enEurope, offrant de nombreuses opportunités de croissance. Ce phénomène concernera des entreprise de toute taille, car bien que le crédit privé ait longtemps été associé aux petites entreprises, de nombreuses entre- prises connues sont détenues par des fonds d'inves- tissement privés, et occupent pour certaines d'entre ellesdesolidespositionsdeleaderetsontcapablesde résister à des cycles économiques difficiles. Enfin, les historiques de performance ont démontré qu'en comparant le crédit privé à la classe d'actifs la plus semblable dans lemarché européen des obliga- tions à haut rendement, les risques sont toujours sur- compensés. Leur rendement a été de 3,5% au cours de la dernière décennie, contre près de 10% pour le crédit privé illiquide. ELTIF 2.0 va encourager la croissance du crédit privé européen By Joakim-Antoine CHARVET, Partner, Head of Tax and Delphine MARTEL, Managing Associate Tax Linklaters Luxembourg I nvestors stepping into the realm of investment fund subscrip- tions are finding themselves at the crossroads of an increasingly com- plex tax and compliance environ- ment. Once part of amere procedural step formali- sing the investor’s ca- pital contribution due upon admission to the fund, subscription docu- ments have evolved into an essential tool for asses- sing the impact of certain tax implications in line with evolving tax regulations. This transformation has been particularly evident with the anti-hybrid rules introduced following Council Directive (EU) 2017/952 as regards hybrid mismatches with third countries (“ ATAD 2 ”) and the recent Pillar 2 rules introduced followingCoun- cil Directive (EU) 2022/2523 on ensuring a global minimum level of taxation for multinational enter- prise groups and large-scaledomestic groups in the Union (“ Pillar 2 ”). ATAD 2 questionnaire Luxembourg’s adoption of the ATAD 2 rules, and inparticular the reversehybridrule effective as from the fiscal year 2022, caused an increase in the re- quiredamount of information tobeprovidedby in- vestors willing to subscribe to a fund and raised stakes for subscription documents, which now in- clude taxquestionnaires that are crucial inassessing the potential impact of theATAD 2 rules. While the belowdevelopments focus on the reverse hybridrule, informationcollectedwith thequestion- naire is alsouseful for determining the impact of the ATAD 2 ordinary rules which, if triggered, may re- sult in certainexpenses at the level of anEUresident subsidiary of the fund becoming non-deductible. The ATAD 2 reverse hybrid rules apply if one in- vestor or several associated investorsholding, on their own or together, 50% or more of the voting rights, capital ownership or profit entitlements in a Lux- embourg transparent fund, such as a Luxembourg société en commandite spéciale ( SCSp ), regardless of its regulatorywrapper, reside in jurisdictions viewing it as opaque. An investor is associated to the fund if it (i) holds 50% or more of interests, voting rights or profit entitle- ments in the fund, or (ii) exercises a significant in- fluence on the fund, or (iii) is part of the same consolidated group for financial accounting pur- poses, the latter case being very unusual in an in- vestment fund context. As a consequence of thismismatch in the qualifica- tion of the fund, the income of the Luxembourg fundmay not be taxable in Luxembourg consider- ing that, as a result of the transparency for Luxem- bourg tax purposes, the income is deemed to be allocated directly to the investor(s), nor may it be taxable in the residence state of the investor(s) where the income of the opaque entity is not im- mediately included in the taxable income of the in- vestor(s). Therefore, and if applicable, theATAD2 reverse hy- brid rules, aiming at eliminating such double non- taxation outcome or long-term tax deferral, may result in the Luxembourg transparent fund - typi- cally not subject to Luxembourg income taxes - be- coming subject to a Luxembourg corporate income tax at a rate of 18.19%on the share of its profits that are not taxed in any other jurisdiction(s). In view of the above adverse tax leakage, fund sponsors are required to determine, prior to the in- corporation of the fund up to its final closing once the final investor composition base is known, but also on a regular basis, whether the admission of a particular investor to the fund will cause the fund to fall within the scope of the ATAD 2 reverse hy- brid rules. For that purpose, it has become standard to include questionnaires in the funddocumentation, thereby assisting fund sponsors in their burdensome duty to collect the relevant information from each in- vestor and perform a preliminary risk assessment. Based on our experience, we note that such ques- tionnaires typically request information with re- spect to (i) the investor’s tax status as taxable, tax exempt, or subject to a 0% tax rate (noting that, for tax exempt investors, the non-inclusion would not result from the hybrid status, but merely from the local status, thus preventing the application of the ATAD2 rules), (ii) for taxable investors the tax treat- ment thatwouldapplyon the incomederived from the fund in the relevant investor’s jurisdictionof es- tablishment, whether or not it has been distributed by the fund, and (iii) the tax treatment of the Luxembourg fund as a tax transparent or tax opaque entityunder the laws of the jurisdiction(s) of the investor(s). Investors are further requested to declare whether they are acting to- gether and/or they are in an ac- counting consolidation and/or one or more investors have a “significant influence” on otherinvestors.Although certain fund documents include representations that investors donot and will not act togetherwith regard to their interests in the fund, those considera- tions are more often dealt with in the questionnaire. The use of tax questionnaires has become standard practice for transparent fund structures. With the recent implementationof the Pillar 2 rules intoLux- embourg law, effective as from the fiscal year 2024, the effectiveness of these questionnaires has been reaffirmed as we note that they have been effec- tively adapted to the purpose of assessing the im- pact of the Pillar 2 rules. Pillar 2 questionnaire In essence, the Pillar 2 rules aim at introducing a minimum effective tax rate of 15% across all juris- dictionswhere certainmultinational groups arepre- sent. Should the Pillar 2 rules be applicable to the fund and/or entities in or through which it invests, the fundand its affiliatesmay suffer additional taxes as effective tax rates could increasewithin the fund’s structure or on its investments. Those rules target constituent entities located in Luxembourg that are members of a multinational group with an annual turnover equal to or greater than EUR 750 million on a consolidated accounts basis. In line with the practice developed for theATAD 2 assessment, market practice now also tends to in- clude questions seeking tounderstandwhether the investor’s participation in the fund could bring the fundwithin the scope of the Pillar 2 rules. Questions in the subscriptiondocumentation focus on, inter alia , (i) whether the fund (or any sub- sidiary or affiliate thereof) will be included in the consolidatedfinancial statementswith the investor (or any subsidiary or affiliate thereof), (ii) whether the fund is deemed to consolidate following the hypothetical application of the deemed consolida- tion ruleswhere the ultimate parent entitydoes not prepare any financial statements, but such finan- cial statementswouldhave beenprepared if the ul- timate parent entitywere required to prepare such financial statements in accordance with (a) an ac- ceptable accounting standard or (b) another finan- cial accounting standard, and provided that such financial statements have been adjusted to prevent any material competitive distortions, and (iii) whether the consolidated turnover of the group preparing such consolidated financial statements or deemed to prepare such consolidated financial statements as per the deemed consolidation rules equals to at least EUR750million (or the equivalent in other currencies). Tax liability and allocation clauses In line with this ongoing tendency, we also note that fund documents now also tend to accommo- date the possibility of allocating the additional tax liability resulting fromtheATAD2 rules and/or the Pillar 2 rules to the investor responsible for such ad- ditional tax. Although, in some cases, the subscription docu- mentation can determine that the amount of such additional tax is to be borne by the ‘ bad ’ investor, the allocation clauses are typically included in the limited partnership agreement (LPA). Challenges in the tax questionnaires’ design Although construed and regardedbymarket prac- tice as a key element in assessing the impact of the ATAD 2 rules and more recently the Pillar 2 rules, such questionnaires raise practical concerns for the various actors within the fund industry. Indeed, sponsors face challenges due to the com- plexity of the rules, which must be distilled into user-friendly questionnaires that are complete, clear, and easilynavigable for the relevant investors located in various jurisdictions, each with its own varying tax system. Meanwhile, the success of the questionnaires and the related collection of information require in- vestors to play an active role. They need to under- stand the purpose of the rules and the relevance of the information required, not only upon subscrip- tion but also on an ongoing basis. In other words, investors are urged to continuously monitor their tax obligations and promptly inform the general partner of any changes thatmay affect the informa- tion provided. This ongoing vigilance is essential, as the informa- tionmay be subject to disclosure to tax authorities. Besides, we note that the tax authorities started sending requests for information to certain funds regarding their investor composition. Conclusion As the global tax landscape evolves, fund subscrip- tion documents have become key instruments for tax monitoring purposes. With detailed question- naires included, these documents are now vital tools for navigating the complex tax aspects. This being said, the objective remains to afford investors a preliminary insight into rule relevance and help sponsors perform a preliminary analysis, albeit without offering a full tax assessment. The evolving landscape of fund subscription documents: Closer look at ATAD 2 and Pillar 2 questionnaires