b'ILPA PRIVATE MARKETS EDGE Q2 202116 17Guided by ILPAs Industry Affairs Committee and full Board of Directors, ILPA engages on a range of policy issues impacting the private markets in accordance with our Global Policy Priorities to ensure the voice of LPs is heard in the corridors of power. NEW LEADERSHIP AT THE SEC:U.S. TAX CHANGES ON THE HORIZON:a new phase, with an outright trade war and an emerging OPPORTUNITIES FOR LPS LPS SHOULD BE PREPARED bipartisanconsensusaboutthecompetitionposedby China. Legislative and regulatory actions by the Trump OnApril14,theUnitedStatesSenateconfirmedGaryLPs across the globe who are invested in U.S. domiciledAdministrationandbipartisanmembersofCongress GenslerasthenewChairmanoftheU.S.Securities&funds need to be vigilant about provisions in their limitedencouragedU.S.investorstodivestfromChinese ExchangeCommission,whichregulatesU.S.domiciledpartnership agreements that may permit GPs to enhancecompaniesaffiliatedwiththePRCmilitary,limited GPs. Gensler previously served in both the Obama (CFTC)GP economics in the wake of potential changes to taxation.accesstoinvestmentbycertainfederalpension and Clinton (Treasury) administrations, after having spentTheU.S.CongressandtheBidenAdministrationaresystemsintoChina-basedcompaniesandcurtailed the bulk of his career at Goldman Sachs. He is generallycurrently negotiating an extensive infrastructure bill whichthe ability of Chinese companies to list and access expectedtobereform-mindedwithafocusonthecouldincludetaxchangesrelevanttoprivatemarketscapital on U.S. securities exchanges. The coordinated interrelatedobjectivesofincreasingtransparencyandinvestors. We anticipate that changes to the tax treatmentcampaign,whichgainedsteamthroughout2020, reducing risk.of carried interest and/or increases in the tax rate on capitalincludedsubstantialpublicpressurebeingplaced gains may be included as revenue raisers in this legislation,on public pensions and university endowments by The3-2Democraticmajorityamongsttheagencysdepending on the ultimate structure and approach of thethe Administration.commissioners raises the likelihood of meaningful changesbill. being introduced in the private funds market over the nextSincetakingpower,theBidenAdministrationhas two years. Interestingly, as further evidence of the weightWhileILPAdoesnothaveapositiononwhattaxrategenerally been focused on domestic issues and has of the private markets, Genslers predecessor, Jay Clayton,forcarriedinterestisappropriate,westronglybelievenot shifted the strategic stance on China. That said, the was named Chair of the Apollo Global Management BoardtaxchangesimpactingtheearningsofGPsshouldnotrhetoric has been dialed back and the tactics modified. in March.bepassedalongtoLPsintheformofenhancedfundFor example, Biden has delayed the implementation economics. We encourage LPs to review their agreementsoftheTrumpExecutiveOrderonChineseMilitary ILPA submitted a letter welcoming Chairman Gensler to hisand stay current on proposed changes to tax policy andCompaniesfromJanuary28,2021toMay27,2021, new role and encouraging him to take specific actions, invigorously question any attempts by the GP community towhich provided some relief for U.S. investors. line with our Global Policy Priorities, to (1) prevent GPs frommodify fund terms in anticipation of higher tax obligations. contracting to fiduciary duties that are lower than thoseFrom ILPAs discussions with individuals familiar with those required under the Investment Advisers Act; (2) to requireleadingtheAdministrationsChinaefforts,theintentis compulsory quarterly fee and expense reporting, and (3)U.S.-CHINA RELATIONS:to focus on effective competition with China, rather than to require SEC examination information to be shared withNEW ADMINISTRATION, NEW APPROACH confrontation. This will almost certainly involve rebuilding LPs.ChairmanGensler,athisconfirmationhearingonrelationshipswithtraditionalU.S.allies,includingthose March 2, 2021, stated the following in regard to a questionTherelationshipbetweenChinaandtheU.S.iscriticalinEuropeandtheQuadinAsia(i.e.,India,Australia, fromSenatorElizabethWarren(D-MA)abouttheneedtotheglobaleconomy,andwhetherdefinedexplicitlyJapan, U.S.). The markets expect a multi-lateral approach for GPs to disclose their practices to LPs: I think its at theor not, a key risk factor in every institutional investmentwithfargreatercoordinationandorganization,and heart of the Investment Advisers Act that they would shareprogram, including private equity strategies. During thegreater separation of political issues from economic issues their fees and any conflicts with investors. Trump Administration, the U.S.-China relationship enteredwhenever possible.'