Baar-Zug, Switzerland, 6 December 2017
Involvement of a former subsidiary (Corporate Finance Partners) in a tax-related offshore transaction in 1998
There is an ongoing public debate about the use of offshore tax havens for the purpose of tax avoidance. In this context, Partners Group ("the firm") has reexamined a transaction carried out by one of its former subsidiaries in 1998. In this transaction, Cayman Island offshore vehicles were utilized to optimize investment returns from a tax perspective on behalf of a small group of entrepreneurs from Germany. To the best of Partners Group's knowledge, this transaction has never been flagged for investigation in the scope of any tax audit of the entrepreneurs involved. However, given the ongoing public debate on tax practices, we believe it is appropriate for us to provide more clarity about this historic transaction for the sake of transparency. At the same time, Partners Group wishes to clearly distinguish between today's standard market practice of using transparent and regulated offshore vehicles for private markets investment versus those used primarily for tax purposes.
Partners Group was established in 1996 and operated three business units in its founding years. In addition to the private equity investment business that it is known for today, the firm offered clients and entrepreneurs asset management services via its Asset Management Partners subsidiary and corporate finance services for corporate mergers and acquisitions via its Corporate Finance Partners subsidiary. In 1998, Corporate Finance Partners was involved in the liquidation of an investment portfolio on behalf of a small group of entrepreneurs and utilized the abovementioned offshore structure involving Cayman Island-domiciled vehicles for this purpose. The structure used for this particular transaction is the only such structure ever set up by Partners Group or its subsidiaries. This structure was legal, recommended by reputable tax advisors and considered generally acceptable by the then in-house legal and tax specialists. The proceeds received by Corporate Finance Partners for this transaction amounted to CHF 563,000. In 1999, Corporate Finance Partners ceased activity and, a few months later, the business unit was formally dissolved. Neither Partners Group AG, nor Corporate Finance Partners, nor any other legal entity of the firm, has ever been the subject of any allegation or investigation by any tax authority globally in respect to this transaction. Although the transaction in question was legal and took place two decades ago, the perception of such transactions has changed and the partners at the firm at the time accept their moral responsibility for it.
Urs Wietlisbach, Co-Founder and Member of the Board of Directors, Partners Group, states: "Although legal, we are aware that the structure chosen at the time for this transaction might be perceived differently today. As such, the partners who were responsible have decided to donate an amount equivalent to the transaction proceeds plus interest, amounting to CHF 1 million, to the German Red Cross."
For the purposes of the public discussion on the use of offshore vehicles, Partners Group holds a fiduciary duty as an asset manager to transparently offer investment vehicles that are tax-efficient and consistent with broad market practices to its client base, which is predominately pension funds and their scheme members. Partners Group today domiciles its investment funds in Luxembourg, the British Channel Islands, Delaware or the Cayman Islands, which is the standard market practice in the private markets industry. In doing so, Partners Group is fully committed to tax transparency and, specifically, does not employ any offshore structures that serve to circumvent taxes either on behalf of its global client base or in its own interests.
Dr. Eric Strutz, Member of the Board of Directors and Chairman of the Risk & Audit Committee, Partners Group, concludes: "We at Partners Group want to make it very clear that our funds and investment companies are registered with the relevant tax authorities and our management companies are regulated and supervised by the respective financial markets supervisory authorities in the US, Asia and Europe."