Alternative Private Credit Structures: Adopting Insurance Dedicated Funds for Favorable Tax Treatment (Part Two of Two)

For fund managers that deal regularly in the insurance space, insurance dedicated funds (IDFs) are common vehicles with solvable features. There may be less familiarity with IDFs, however, among private credit fund managers that are better versed in some of the more mainstream approaches to avoiding effectively connected income and other tax issues (e.g., leveraged blockers). Managers willing to navigate some idiosyncrasies of the fees, investors, fundraising and other issues that come with IDFs could be rewarded with an even more tax-advantageous private credit vehicle. To highlight the benefits of IDFs and real estate investment trusts (REITs) as less common private credit vehicles, K&L Gates hosted a webinar that was moderated by Edward Dartley and featured fellow partners Yasho Lahiri and Adam J. Tejeda. This second article in a two-part series analyzes various nuances of using IDFs for private credit investing. The first article did the same for REITs. For additional insights from K&L Gates, see our two-part series on seeding arrangement insights: “How a Manager Can Optimize Its Infrastructure to Attract a Seeder” (Sep. 22, 2020); and “Finding the Right Seeder/Manager Rapport and Tips for Luring Other Prospective LPs” (Sep. 29, 2020).

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