In a memorandum issued on 21 February 2025 and titled “America First Investment Policy”, President Trump set out his administration’s new policy towards foreign investment into the US. 

Broadly, the policy seeks to facilitate inbound investment by “allies and partners” while simultaneously restricting investment by “foreign adversaries, including the People’s Republic of China (PRC)”. 

According to this new policy, the US will (amongst other measures) implement new rules to: 

• “create an expedited “fast-track” process, based on objective standards, to facilitate greater investment from specified allied and partner sources in United States businesses involved with United States advanced technology and other important areas. This process will allow for increased foreign investment subject to appropriate security provisions, including requirements that the specified foreign investors avoid partnering with United States foreign adversaries [emphasis added]”;
• “stop PRC-affiliated persons from buying up critical American businesses and assets, allowing only those investments that serve American interests”; and
• “stop United States companies and investors from investing in industries that advance the PRC’s national Military-Civil Fusion strategy”.    

For these purposes, the memorandum defines “foreign adversaries” as being the PRC (including Hong Kong and Macau), as well as Cuba, Iran, North Korea, Russia and Venezuela. 

The measures announced in this policy, when implemented, are likely be relevant to all private fund sponsors that make investments in the US (as well as, in some cases US investors in non-US funds). As yet, though, there are few details available. We understand that implementation of the policy will require further action on the part of Congress and/or governmental agencies, and we will continue to monitor developments in this area. 

As well as the “America First Investment Policy”, private fund sponsors should also be aware of the US outbound investment rules (in force since 2 January 2025). 

In brief, these rules apply to US persons and prohibit or require notification to the US Department of the Treasury of certain types of outbound investments – specifically, investments with a nexus to the PRC (again, including Hong Kong and Macau) in any of the following three industry sectors: semiconductors and microelectronics, quantum information technologies and artificial intelligence.

Of particular relevance to private fund sponsors, the rules confirm that an investment by a US person in a private fund will be caught if: (1) the US person knows that the fund might make an investment that is prohibited or notifiable; and (2) the fund does in fact make such an investment. The rules do however provide two possible exemptions for such an investor: 

• if its investment in the fund is limited to $2m; or
• if it obtains an excuse right with respect to any potential prohibited or notifiable transactions. 

As a result of these rules, we have already seen an uptick in diligence questions from US investors about sponsors’ potential investment activities in the three targeted sectors in the PRC (including confirmation that no such activities are contemplated), as well as excuse right requests. Sponsors should similarly expect to receive an increasing number of such requests in the coming weeks and months. 

A further factor for sponsors to consider is that, for the purposes of these rules, a “US person” includes a US citizen or permanent resident, wherever located. This is relevant since the rules prohibit a US person from knowingly directing an investment that would be prohibited if undertaken by a US person. As a result, for example, the rules will apply to a US citizen who sits on the investment committee of a UK private fund sponsor considering an investment in a PRC-based AI company. In such a case, the rules state that the US person should recuse themselves from all decisions relating to that investment.  

Sponsors targeting investments with a PRC nexus in the three targeted sectors should consider whether they have any US persons in senior management and/or investment roles and, if so, whether they should instigate a formal recusal process to allow those US persons to comply with the rules. 

We noted in January’s Radar that the US District Court for the Northern District of Texas had overturned the SEC’s Dealer Rule, but that the SEC had filed an appeal against the ruling.

On 19 February 2025, the SEC withdrew its appeal, effectively confirming the end of the Dealer Rule. 

We recently published a short introduction to three recent retailisation options for private fund sponsors: ELTIFs, LTAFs and Luxembourg Part II funds. 

As the note outlines, the right retailisation choice for a sponsor will always depend on the type and location of the investor base it is targeting. We have advised on a significant number of launches of all three product types and are well-placed to help sponsors navigate the different regulatory regimes.       

We also recently published an article on our dedicated Private Capital Solutions website that examines the increasing trend for private credit sponsors to launch dedicated asset-based finance and asset-based lending strategies. 

The article looks to define asset-based finance, showcase the growth in the market and identify key drivers and challenges for sponsors looking to do more in this space.

Many private fund sponsors will be aware that German insurers and pension funds are subject to regulatory requirements imposed by the German Investment Ordinance that can affect their investments in private funds. 

The Investment Ordinance was updated with immediate effect on 7 February 2025 to create a new 5% “bucket” specifically for infrastructure investments. Previously, German investors subject to the Investment Ordinance (commonly referred to as VAG investors) had to allocate their infrastructure investments to one of the other permitted buckets, depending on their structural features. The creation of the new 5% infrastructure bucket does not widen the scope of permitted investments for VAG investors, but does create more headroom for infrastructure investments as they no longer have to compete for space with, e.g. investments in the real estate bucket. 

The policy intention is to facilitate investment by VAG investors into infrastructure, so this change will be welcomed by private fund sponsors pursuing infrastructure strategies.

This note by the German law firm, Noerr, provides more detail on the changes. 

The European Securities and Markets Authority (ESMA) announced on 14 February 2025 that, together with the national regulators of the 27 EU member states, it was launching a “common supervisory action” into the compliance and internal audit functions of alternative investment fund managers (AIFMs) across the EU. 

The review will assess the extent to which AIFMs have established effective compliance and internal audit functions and the adequacy of those functions’ staffing, authority, knowledge and expertise to enable them to perform their duties under AIFMD. 

ESMA will report on the results of the exercise in 2026. 

Typically, where reviews of this kind identify any common weaknesses or failures, ESMA and/or the national regulators follow up with updated guidance, Q&As or statements of expected best practice, coupled with high-profile enforcement actions. While any such consequences are likely a year or two down the line, sponsors can expect the compliance and internal audit functions of their AIFMs (whether in-house or external “hosts”) to come under increasing scrutiny in the coming years.