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Are you planning to create or develop your own private investment funds? Our law firm has many years of experience in the field of investment funds law and will offer a comprehensive solution for any tasks: from developing the fund structure and drafting founding documents to interacting with regulators and compliance support.
A team of experienced investment funds lawyers offers analysis and selection of the optimal jurisdiction, preparation of documents, coordination and obtaining of licenses, creation of AML/KYC compliance programs, and protection of the interests of institutional investors. Our investment advisers provide support to private investment funds, registered investment companies, and broker-dealers, as well as clients engaged in structuring, distribution, trading, investing, and hedging with derivatives and structured products.
What are investment funds?
Investment funds are special organizations that accumulate funds from numerous investors (both individuals and legal entities) and invest them in various assets: securities, real estate, bonds, stocks, commodities, etc. The goal of such a fund is to manage the collected capital as efficiently as possible to increase investment returns while balancing risks for all participants.
The main functions and purpose of investment funds:
- Collective investing. The fund allows investors to pool their resources, which facilitates access to larger and more diversified investment projects. This is especially important for individuals who do not have sufficient funds or knowledge for the direct purchase of significant assets;
- Professional management. Investment funds are managed by management companies or individual managers who have experience and expertise in the field of finance, markets, and risk management. The task of the managers is to analyze the market and optimally allocate the portfolio based on the strategy and goals of the fund;
- Diversification of risks. The fund invests money in various directions, reducing the likelihood of losing all funds in case of failure of a single asset;
- Simplifying market entry. Participation in the fund often requires only a small contribution. The investor gains access to a large number of assets and professional management;
- Transparency and control. Most regulated investment funds are required to disclose information about their structure, portfolio composition, and performance results, which provides investors with an understanding of how their funds are being used.
The principle of operation of investment funds is quite simple. The fund issues equity units (shares, stocks, or other instruments) that are purchased by investors. The value of these shares is proportional to the volume of the fund’s managed capital.
The management company forms an investment portfolio based on the fund’s strategy (aggressive, balanced, conservative). The set of assets may vary depending on the fund’s goals and assumptions.
Net Asset Value is calculated based on the current price of the assets comprising the portfolio. This is usually done weekly or even daily. Institutional investors can track changes in the value of their shares and make decisions about buying or selling.
Some funds distribute part of the profit as dividends, while others reinvest the income. The choice depends on the fund’s policy.
Depending on the jurisdiction, investment funds law and licensing requirements for funds may vary. It is important to comply with local regulations and regulatory acts. Proper licensing increases investor trust and ensures operational transparency.
Investment funds are one of the most effective mechanisms for collective investing. They pool the resources of numerous investors to provide professional capital management, risk reduction through diversification, and ease of market entry. Our team of investment funds lawyers offers assistance in launching investment funds, their licensing, and adaptation to local legal requirements.
Types of Investment Funds
There are several types of investment funds, each with its own characteristics, strategy, and target audience. Choosing the right fund depends on goals, risk tolerance, and investment horizon.
If you are looking for an affordable and understandable tool with professional management, a mutual fund is the optimal solution. If liquidity and transparency, as well as low costs, are important to you, pay attention to ETFs. For those who are ready to take risks and want the most flexible strategies, hedge funds focused on more aggressive tactics will be suitable.
Mutual investment funds
Mutual investment funds are organizations that accumulate investors’ funds and invest them in various securities. In return, institutional investors receive shares proportional to their share in the fund’s total capital.
In most cases, mutual funds are “open-ended,” allowing investors to buy and sell shares at any time. The value of a share is calculated based on the total Net Asset Value of the fund divided by the number of issued shares.
Asset Management decides where to invest the collected funds. Managers conduct market analysis and monitor the balance between profitability and risks. Funds are allocated across several types of assets, which reduces the risk of losses due to a decline in a specific security or industry.
You can start with a small amount, which is convenient for private investors. Managers and investment advisors have the necessary experience and knowledge for asset selection.
Exchange-Traded Funds (ETF)
Exchange-Traded Funds, ETF, are instruments that combine the features of mutual funds and stocks. Like mutual investment funds, they invest in a basket of assets, but at the same time, they trade on the exchange in real-time, like stocks.
ETFs are usually tied to specific indices or market sectors. Investors can see exactly which assets are included in the fund. Unlike mutual funds, buying and selling shares is done during the trading day, and the price continuously changes depending on supply and demand. ETFs can cover not only stocks and bonds but also commodities, currencies, real estate, and even cryptocurrency indices.
Among the advantages of Exchange-Traded Funds, it is worth noting high liquidity (the ability to trade ETFs instantly throughout the entire trading day) as well as low costs (fees are usually lower than those of actively managed mutual funds).
Hedge funds
Hedge Funds are more flexible and often riskier investment structures that use a wide range of strategies: from buying undervalued stocks to complex derivative contracts. Hedge funds are aimed at professional and qualified investors capable of investing large sums and prepared for high risks.
Compared to public funds, hedge funds are not as strictly regulated, which gives them the freedom to choose strategies. They target wealthy private individuals or large institutional investors who are ready for long-term capital allocation. A hedge fund can use arbitrage, short selling, market-neutral positions, and much more.
However, it is worth highlighting some drawbacks. Many hedge funds have lock-up periods during which an investor cannot withdraw capital. In addition to the basic management fee (often 2%), funds charge a “success fee” (often 20% of the profit).
Our legal services
The creation and administration of investment funds require a deep understanding of legal regulations, as well as constant monitoring of changing legislation. That is why it is extremely important to collaborate with an experienced legal firm. Our investment advisers have extensive practical experience in the field of investment funds and are ready to provide comprehensive support at all stages — from fund formation to the resolution of potential disputes.
Formation and structuring of funds
At the international level, there are different models of funds. We analyze your project, taking into account tax benefits, capital requirements, investor specifics, and the desired level of transparency.
After this, we proceed to the development of founding documents. The charter, fund regulations, agreements with management companies and depositories—each document must comply with legislation and take into account the interests of investors. The investment funds attorney forms the regulatory framework, outlines mechanisms for income distribution, rules for investor entry/exit, and resolution of internal disputes.
An important aspect is to ensure transparency and protect the interests of depositors. We offer a set of measures to minimize risks, outline the liability conditions of the management company, and ways to compensate for losses in case of dishonest management.
Many funds require approval or a license from the local regulator. An investment funds attorney will prepare a complete set of documents, conduct negotiations with government authorities, and ensure the correct submission of the application.
Compliance with regulatory requirements
Investment funds operate in a complex legal environment. We monitor all updates and promptly adapt the fund’s policy.
The most important task is to ensure a reliable system for client identification and verification to comply with regulatory requirements for preventing money laundering and terrorism financing. An investment funds attorney develops step-by-step algorithms, trains the fund’s staff, and helps avoid fines.
We create and adjust internal instructions, codes, and regulations to ensure the fund complies with market standards and investor expectations. Regular internal audits identify vulnerabilities and enhance transparency.
Investment funds are required to provide investors and regulators with reports on assets, performance, and expenses. Our firm advises on the format, frequency, and content of such disclosures, reducing the risk of misunderstandings and claims.
In the work of management companies, conflicts may arise related to affiliated persons or competing projects. Investments advisers develop conflict management policies so that all decisions are made in the interests of investors.
Constant legal support
Markets are changing, and the fund faces new challenges: asset volatility, changing legislation, cross-border transactions. We analyze each risk and offer legally secure ways to minimize it.
Disputes may arise between investors and the management company, fund partners, or counterparties. The lawyers of our company have experience in resolving conflicts both in courts and in arbitration and mediation bodies.
If a fund expands, merges with another fund, changes jurisdiction, or adds new asset classes, we take on all the legal aspects of such transformations.
We strive for ongoing collaboration, offering flexible service formats (one-time consultations, subscription services, project consulting). As a result, you can always rely on the legal security of your investment business.
Why should you choose our law firm?
Our team of investment advisors has been dealing with licensing, structuring, and managing investment funds in various jurisdictions for many years. We successfully interact with regulators and know what requirements they impose on funds. Our specialists constantly improve their qualifications to provide modern solutions for clients.
Each investment fund is unique in its purpose, target audience, and asset structure. We conduct an in-depth assessment of your business, risks, and goals to propose an appropriate model.
We do not limit ourselves to merely obtaining a license: our investment advisors provide consultations on taxation, corporate structure, preparation of internal regulations, and compliance management throughout the entire lifecycle of the fund.
When working with funds, the key factor remains the trust of investors. We help establish transparent and clear relationships between the management company and investors by outlining the income distribution policy, share buyback, and exit mechanisms from the fund.
In our portfolio, there are dozens of projects, from small specialized funds to large investment platforms. We are proud that many clients stay with us for further support. Positive client recommendations confirming competence and reliability are the best guarantee of the quality of our services.
Schedule a consultation
If you are aiming to open your investment fund or are looking for reliable experts to support it, our law firm is ready to become your indispensable partner. We provide comprehensive services from initial consultation and jurisdiction selection to ongoing legal support and compliance.
Contact us right now to get a personalized solution for your project and ensure that the fund will operate in full compliance with legal regulations and provide high management standards. We believe that only a personalized approach and deep expertise guarantee the successful development of an investment fund.
