Alert 06 April 2017

The UK's new fund vehicle – will it work for real assets?


Darren Stolzenberg

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Tom Taylor

Knowledge Lawyer
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Today, the UK marked the 110th anniversary of the birth of the UK limited partnership by introducing a new LP vehicle designed specifically for the 21st century funds industry. New and existing UK limited partnerships can now opt to become ("PFLPs") (private fund limited partnerships).

Here we look at the PFLP's key plus-points and consider which real asset investments might benefit from using the new vehicle.

What are the advantages of using a PFLP?

PFLPs are designed specifically for global investment funds, and have a number of advantages over the "standard" UK limited partnership vehicle. Amongst the most important of several modernising features are:

  • Investors are no longer obliged to make their financial commitment to fund partnerships using the mix of loan and capital required under the old rules.
  • Any capital that investors contribute no longer needs to be registered on the UK company register.
  • Increased certainty about which aspects of a PFLP's business an investor can participate in without fear of losing its limited liability (the legislation contains a "white list" of activities that will not constitute an investor taking part in management).

Our CMS colleagues have comprehensively summarised these and further technical aspects of the PFLP here (the final legislation does not differ from the previously published proposals).

So should you use the PFLP?

Below we have set out some considerations that will influence the decision as to whether or not the PFLP regime is suitable for various real asset investment arrangements that commonly employ UK limited partnerships. The analysis will differ in individual cases, so please get in touch to discuss whether your existing and future LP structures might benefit by becoming PFLPs.

 LP used for

 Use PFLP regime?


 Existing fund



The conversion process, whilst not complicated, is not free, and is unlikely to add significant benefit. Capital contributed prior to designation as a PFLP will remain subject to the prohibition on withdrawal.

 New fund



Simplification and greater certainty from the outset, particularly as to investors' limited liability.

 Feeder funds



Using the PFLP regime will make it clear that investors participating at a feeder fund level in main fund level decisions will not lose their limited liability by doing so.

 Joint venture



Joint ventures are likely to be eligible for the new regime. However the benefits of the white list will be more remote where limited partners exercise control through holdings in the general partner, as is common.

 Segregated mandate



Using the PFLP regime will allow investors to participate in investment decisions without losing their limited liability.




Using the PFLP regime will allow investors to participate in investment decisions without losing their limited liability.