How to choose a jurisdiction for a private equity fund

Nikita Veremeev

12.12.2025 | 6 min read

Updated: 12.12.2025

Imagine: you have just closed a $100 million deal, but six months later half the proceeds go to taxes and fines because of an error in the fund’s structure. According to Preqin, nearly 40% of new Private Equity funds face serious legal and tax issues in the first 2–3 years, and in 70% of cases the reason is the wrong choice of jurisdiction.

This is a strategic decision that affects:

• the fund’s tax residency and the efficiency of the structure,
• access to institutional investors and family offices,
• the level of compliance and the risk of funds being frozen,
• the flexibility of the investment strategy and the ability to scale.

If you want your Private Equity fund to be not just registered, but built as a reliable, scalable, and attractive structure for investors: read to the end. This is a practical guide, not theory.

Criteria for choosing a jurisdiction for a Private Equity fund

When a client comes with the idea to create a fund, the first question we ask at COREDO is: “What is more important to you — minimal costs or maximum attractiveness to institutional investors?” The answer determines the whole approach to choosing a jurisdiction for the fund.

A mistake here can lead to:

• double taxation,
• investors refusing to participate due to weak legal predictability,
• problems with licensing the management company,
• freezing of accounts due to AML/KYC non-compliance.

Based on COREDO’s practice, the key selection criteria for the jurisdiction of a Private Equity fund can be grouped into four blocks:

1. Tax residency and tax planning of the fund
2. regulatory requirements and the legal framework
3. Corporate structure and legal predictability
4. Infrastructure: custodian, management company, banks

Let’s examine each of them in detail.

Fund tax residency and tax planning

A fund’s tax residency is not just “where we pay taxes,” but a key factor affecting the fund’s ROI and investment strategy. The impact of the tax regime on the choice of jurisdiction cannot be overstated.

In a Private Equity fund there are three main tax levels:

1. The fund as a legal entity
2. The management company (AIFM)
3. Investors (LP)

The goal is to minimize taxes at each level without breaching international AML/KYC standards and regulator requirements.

# How tax jurisdiction affects ROI

In 2024 PwC conducted a study on the efficiency of structures for Private Equity funds. It showed that the difference in net returns between an optimal and a suboptimal jurisdiction can reach 15–20% over the fund’s lifecycle. This is not “savings,” but a direct impact on ROI and the fund’s performance metrics.

COREDO’s practice shows: for funds with international investors it is optimal to combine an onshore jurisdiction for the fund (for example, Luxembourg, Ireland) and an offshore one for the management company. This allows:

• to preserve the fund’s tax residency in a jurisdiction with a strong reputation,
• to use tax benefits in offshore jurisdictions for the management company,
• to minimize the risk of funds being blocked due to “grey” jurisdictions.

# Practical tips for tax optimization

1. Assess investors’ taxes
If the majority of investors are from the US, EU or Asia, it is important to consider how the fund’s jurisdiction affects their taxation. For example, some jurisdictions may be classified as “passive” (PFIC) for US investors, which creates complications.

2. Use tax-transparent structures
For closed-ended funds in the EU, structures such as SICAV, FCP or LLP are often chosen, which are recognized as tax-transparent for tax purposes. This reduces the risk of double taxation.

3. Take into account local transaction taxes
In some jurisdictions there are taxes on the acquisition of shares, real estate or assets of portfolio companies. This directly affects deal costs and ROI.

4. Plan the exit strategy
The jurisdiction should be convenient for exiting investments: sale of shares, IPO, M&A. Taxes on capital gains, dividends and interest should be predictable and competitive.

Regulatory requirements and laws

The regulatory environment is the second most important criterion for choosing a jurisdiction for a Private Equity fund. It determines:

• requirements for compliance and KYC for funds,
• the need to license the management company,
• the level of transparency in the fund’s reporting,
• access to institutional investors.

Regulators in different regions approach Private Equity differently. Let’s review the key jurisdictions.

# ESMA, SEC, MAS, AFSA: how regulators affect the fund’s structure

• ESMA (EU)
  In the EU the AIFMD directive applies, which regulates alternative investment funds, including Private Equity. Key requirements:
  • registration or notification in the fund’s country of residence,
  • the presence of a qualified management company (AIFM),
  • requirements for the fund’s depositary,
  • strict rules on disclosure and reporting.

  For funds with institutional investors from the EU, registering the fund in the EU (Luxembourg, Ireland, Malta) is almost a requirement. This provides legal predictability and investor confidence.

• SEC (USA)
  The SEC regulates funds raising capital from the US. For Private Equity funds Regulation D, Regulation S and requirements for accredited investors apply. If you plan to attract institutional investors from the US, it is important to consider:
  • disclosure requirements,
  • restrictions on advertising and marketing,
  • reporting obligations.
• MAS (Singapore)
  MAS applies proportionate regulation: requirements depend on the size of the fund, the type of investors and the strategy. For qualified investors (QI)

requirements are less stringent than for retail investors. This makes Singapore an attractive jurisdiction for registering a fund in Asia.

# Proportional regulation and its impact on the fund

• Small funds with qualified investors may have simplified reporting and less stringent compliance requirements.
• Large funds with institutional investors fall under the full set of requirements, including audit, disclosure and transaction monitoring.

# Features of regulation in the EU, Asia and Africa

• EU
  The EU has a strong legal framework for closed- and open-ended funds, high legal predictability and strict transparency requirements. This makes the EU attractive for institutional investors but requires substantial compliance support.
• Asia
  In Asia (Singapore, Hong Kong, DIFC, AIFC) regulation is more flexible, especially for funds with qualified investors. This is convenient for funds targeting Asian markets but requires thorough Due Diligence on local requirements.
• Africa
  In Africa regulation is less unified, but there are promising jurisdictions (for example, Mauritius, South Africa). Registering a fund in Africa can be advantageous for investments in regional markets, but requires deep understanding of local legislation and case law.

Corporate structure and legal predictability

# Structure of a closed-ended fund vs an open-ended fund

• Closed-ended (closed fund)
  • Fixed life span (usually 5–10 years).
  • Investors contribute capital at the outset; exit: through asset sale or IPO.
  • Suitable for Private Equity, venture capital, buyout deals.
  • Requires a clear exit strategy and mechanisms to protect investor returns.
• Open-ended (open fund)
  • No fixed term, investors can enter and exit at any time.
  • Suitable for hedge funds and funds of liquid assets.
  • Requires high liquidity and strict cash flow management.

# Role of corporate agreements and shareholder agreements

Corporate agreements in a Private Equity fund are the foundation of the fund’s corporate governance and the protection of investors’ rights. Key documents:

• Fund charter / fund formation agreement
• Shareholders’ agreement (SHA)
• Investment memorandum
• Corporate agreements and shareholders’ agreements for portfolio companies

This is especially important for funds with family offices and club deals, where investors require a high degree of control and transparency.

# Licensing of the management company and choosing a custodian

The management company (AIFM): is the “brain” of the fund. Its Licensing is a critical stage:

• In the EU the management company must hold an AIFM license and comply with AIFMD requirements.
• In Asia (Singapore, Hong Kong, DIFC) the management company obtains a license to manage funds.
• In offshore jurisdictions the management company may be unlicensed, but this reduces attractiveness to institutional investors.

The custodian (or fund depositary) is the independent safekeeper of the fund’s assets. Its role:

• control over the assets,
• control over profit distribution,
• ensuring compliance and transaction monitoring.

Registration of a Private Equity Fund in the Regions

Теперь перейдем к практической части: как выглядит регистрация фонда в ЕС, Азии и Африке на примере конкретных юрисдикций.

Fund registration in the EU

Main jurisdictions

• Luxembourg
  • A strong legal framework for closed-end and open-end funds.
  • High legal predictability and case law.
  • Suitable for large funds with institutional investors.
• Ireland
  • Transparent tax system, tax-transparent status.
  • Good infrastructure: banks, custodians, Management companies.
  • Suitable for funds with investors from the US and the EU.
• Malta
  • More flexible requirements suitable for mid-sized funds.
  • Good infrastructure and regulator support.

# Procedures and requirements

• Registering a fund in the EU requires:
  • choosing a structure (SICAV, FCP, LLP, etc.),
  • appointing a management company (AIFM),
  • appointing a custodian,
  • preparing the investment memorandum and corporate documents.
• Reporting and compliance:
  • regular reporting to the regulator,
  • audit,
  • disclosure of information to investors.

Fund registration in Asia

Азия – ключевой регион для фондов, ориентированных на ростовые рынки, технологические компании и региональные сделки.

# Popular jurisdictions

• Singapore
  • Proportional regulation by the MAS, flexible requirements for qualified investors.
  • Good infrastructure: banks, management companies, custodians.
  • Suitable for fund registration, especially for IT companies and startups.
• Hong Kong
  • Strong financial infrastructure, access to Chinese markets.
  • High standards for compliance and KYC.
• ADGM (Abu Dhabi Global Market) and AIFC (Astana)
  • International financial centres with an English-language legal system.
  • Suitable for funds focused on the Middle East, Central Asia and international markets.

# Licensing and compliance specifics

• The management company must obtain a license to manage funds.
• AML requirements/KYC and compliance meet international standards.
• For funds with institutional investors, transparency of reporting and corporate governance is important.

Fund registration in Africa

Африка, перспективный, но сложный регион для регистрации фонда.

# Regulatory features and AFSA requirements

• There is no single regulator in Africa, but there are national regulators and international centres (for example, Mauritius, South Africa, ADGM).
• AFSA requirements for investment funds include:
  • the presence of a licensed management company,
  • custodian requirements,
  • strict AML/KYC and compliance rules.

# Advantages and risks

• Advantages:
  • access to growth markets,
  • tax incentives in some jurisdictions,
  • the ability to invest in regional projects.
• Risks:
  • weak legal predictability in some countries,
  • difficulties with banks and custodians,
  • high risks of funds being blocked due to AML/KYC.

Risk Management in a Private Equity Fund

risk management of a Private Equity fund is not just an ‘insurance’, but part of the investment strategy.

Investment Fund Due Diligence

Due Diligence is the basis for choosing the fund’s jurisdiction and structure. At COREDO we conduct comprehensive Due Diligence:

• Legal Due Diligence
  • Analysis of the jurisdiction’s legal framework,
  • assessment of case law,
  • verification of compliance and KYC requirements.
• Financial Due Diligence
  • Assessment of tax burden,
  • analysis of operating costs,
  • modeling ROI under different scenarios.
• Tax Due Diligence
  • Assessment of the tax residency of the fund and investors,
  • analysis of double taxation risks,
  • planning the exit strategy.

Mechanisms for Protecting Investors’ Interests

• Corporate agreements in a Private Equity fund
  • Shareholders’ agreements,
  • put and call options,
  • anti-dilution, tag-along/drag-along.
• Transparency of fund reporting
  • Regular reporting to investors,
  • audit,
  • disclosure of information about deals and risks.
• The role of the custodian and the management company
  • Independent control over assets,
  • ensuring compliance and transaction monitoring.

KYC/AML Automation in the Fund

KYC/AML automation is not just a ‘trend’, but a tool to reduce the risk of funds being blocked. At COREDO we implement automated KYC/AML procedures that:

• speed up investor onboarding,
• reduce the risk of errors,
• increase transparency and meeting compliance requirements compliance.

Choosing a Jurisdiction and Scaling a Private Equity Fund

Practical recommendations for choosing a jurisdiction and scaling a Private Equity fund start with a basic decision – which legal form and structure to put at the foundation. How competently this structure is chosen and designed affects not only investor protection and the regulatory burden, but also the opportunities for further scaling of the fund and entry into new markets.

How to choose a fund structure

• For institutional investors – an onshore jurisdiction (EU, Singapore, Hong Kong).
• For family offices and club deals: a multi-jurisdictional structure with an offshore entity for the management company.
• For regional markets, a local jurisdiction (Mauritius, AIFC) with international infrastructure.

Scaling the fund across multiple jurisdictions

• Use multi-jurisdictional structures to enter new markets.
• Adapt the fund’s corporate governance to the requirements of different regions.
• Consider the long-term consequences of jurisdiction choice for the fund’s investment strategy.

Attracting institutional investors and family offices

• Ensure high transparency in the fund’s reporting.
• Use reliable custodians and management companies.
• Prepare an investment memorandum that complies with the requirements of qualified investors.

Key findings and recommendations

1. The fund’s tax residency is a key factor affecting ROI and investment strategy.
2. Regulatory requirements determine the level of compliance, KYC and attractiveness to investors.
3. The corporate structure is the foundation for risk management and protecting investors’ interests.
4. Multi-jurisdictional structures allow the fund to scale and minimize risks.
5. Legal support for the fund and AML services for funds are essential elements of long-term success.

If you want your Private Equity fund to be not just registered but built as a reliable, scalable and attractive structure for investors, COREDO is ready to provide legal support at every stage of the fund’s formation.