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Three Considerations When Seeking Shelter or Betting Big | Tarter Krinsky & Drogin LLP

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A perfect storm of inflation, a lagging stock market, and geopolitical uncertainty are increasingly driving investment funds and family offices to seek out alternative and private equity investments as they head into the second half of the year. While such investments provide an increased possibility for return, the current market environment embeds within them three primary diligence considerations.

  • Sanctions – The United States and many other countries have imposed a series of overlapping sanctions against Russia and various high net worth individuals with ties to the Russian regime that require stricter scrutiny for both direct investments into private companies and large asset purchases (real estate, etc.). Understanding a counterparty’s ownership structure and key personnel is critical to navigating this evolving and incredibly intricate sanctions web. Prompt and accurate sanctions analyses are increasingly becoming the first step in analyzing potential investments.
  • Fund Structure and Ownership – Access to certain alternative investments is increasingly jurisdiction dependent and it is crucial that an investment fund or family office determine the ideal structure for accessing such opportunities. The traditional default of domiciling offshore entities in the Cayman Islands might not be the best choice. In fact, domicile decisions are more than ever being driven by investment assets rather than corporate structure.
  • Fraud – Market uncertainty such as what we are experiencing now provides the unscrupulous with the perfect environment to take advantage of sophisticated investors seeking return. Times such as these warrant strict adherence to the old adage, “If it is too good to be true, then it probably is.” While fraudulent crypto investments have received significant regulatory and prosecutorial attention recently, investors must remain vigilant to avoid traditional Ponzi or similar schemes propounded by scammers.

It is critical that investment funds and family offices, particularly those without in-house counsel, seek legal guidance in choosing investments for wealth

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