Fund Forum

2 min

Development Finance Institutions and Their Role in Private Equity Funds

Development finance institutions (DFIs) are entities that, among other things, provide capital for economic development projects. Historically, DFIs, which are founded by governments and charitable institutions, fund projects that would generally not be able to get funds from commercial lenders or invest in the private sector. DFIs are typically backed by countries with developed economies; have provided finance to private sector investments that promote development in certain countries; play a fundamental role in emerging markets (there has been a rapid expansion over the past few years in DFI investment in private equity funds); and are important to certain private equity funds, as they often act as cornerstone investors and can provide the momentum for a successful first close.

The United States International Development Finance Corporation Enters Private Equity

In late 2018, the president signed Public Law 115-254 into law – the Better Utilization of Investments Leading to Development Act of 2018 (BUILD Act). The BUILD Act creates the United States International Development Finance Corporation (IDFC), a new wholly owned government corporation. It will replace the Overseas Private Investment Corporation (OPIC) and transfer, among other functions, the Development Credit Authority from the U.S. Agency for International Development (USAID) to the IDFC. It is subject to reauthorization in seven years. The most important new authority under the BUILD Act, and the focus of this article, is the authority of the IDFC to place equity investments pursuant to Title II, Section 1421(c)(1). Currently, OPIC is strictly limited to debt issuance and political risk insurance, so this significant new expansion into equity puts the IDFC at the limited partner table for the first time.

Protecting Patent Rights from the On-Sale Bar after Helsinn

In January, the United States Supreme Court in Helsinn Healthcare S.A. v. Teva Pharms. USA, Inc. held that the sale of a patented invention to a party who is obligated to keep the invention confidential can trigger the "on-sale bar" of the America Invents Act. This decision emphasizes the ongoing need for intellectual property owners to take care that certain commercial transactions involving their inventions do not interfere with their patent rights.