“The most significant impact of FATCA for the private equity and hedge fund industry will be on non- U.S. funds. The definition of FFI is quite broad, and appears to include virtually all non-U.S. investment vehicles, includi.g foreign feeder funds, foreign stand-alone funds and blocker corporations as well as foreign alternative investment vehicles, regardless of being offered or traded publicly.
It is expected that FATCA compliant counterparties (banks, broker/dealers, custodians, etc.) are unlikely to transact with non-FATCA compliant funds. As such, these funds should consider becoming participating FFIs by entering into an FFI Agreement with the IRS. “