Dynamism and proactivity in times of uncertainty
Along with the Covid-19 pandemic's tumult, alternative investment fund managers have had to face a number of tax changes that are anticipated to have a tremendous impact on their business.
This year has been particularly dynamic for boutique accountancy firm, Akram & Associates. At the height of the pandemic, the firm helped clients apply for EIDL and PPP loans. A few months later, Akram & Associates advised and supported onshore and offshore investment fund clients in making changes to their fund structure and prepare for new tax rules.
“At the beginning of the pandemic, clients were very apprehensive about making changes,” notes Muhammad Akram, founder of Akram & Associates. “Now, after some certainty has been found and we have become accustomed to our new “normal,” clients are beginning to reach out for assistance with tax and regulatory change preparation.”
During the pandemic, many tax changes were introduced: “For example, there has been a recent IRS ruling on carried interest that may impede hedge funds from getting preferential tax treatment. Many fund managers are reaching out to us to ask for advice and support with this.”
401K is another area in which rules have changed immensely this year. These plans can now invest in private equity, and therefore PE firms have reached out to us for guidance. Investment managers are also concerned about impending heightened tax rates post-election. “They want to put structures in place to avoid or minimise their exposure to the potential tax changes. Some states like California and New York have already increased their tax rates at the highest income level,” Akram notes. The changing tax climate offers taxpayers to re-evaluate their estate plans and take advantage of unique tax savings opportunities while they still can.
In Akram’s view, the numerous tax landscape changes have helped the firm grow: “We are working diligently to stay ahead of the curve to understand the new tax rules and how they will affect investment funds. As our clients’ trusted partner, it is our responsibility to advise them, to the best of our ability, of any tax and accounting changes.”
Although the pandemic saw many firms move to a remote working model, Akram & Associates continued to work from its premises, which, according to Akram, was a positive experience. He says: “We didn’t shut our doors. When clients called, there was always someone to answer their call. We are a boutique firm, and our office is large to accommodate social distancing best practices. Therefore, we encouraged people to come to the office.”
He says this helped the firm: “We normally close our audit and tax season at the end of August, but this time we wrapped up the season by the end of June. Our clients really valued that.”
Akam & Associates primarily works with emerging investment managers and aims to promote a symbiotic relationship with such groups: “We take a partnership approach when working with our clients, aligning our success to theirs so that we both prosper.”
“The majority of our investment fund clients have spun out of larger hedge fund shops before launching their fund. We understand the pressures they are under when starting their business and therefore partner with them so that they can focus on managing the portfolio.”