Valsen Fiduciaries Funds

Fund Administration

A Guide on Setting up An Investment Fund

An investment fund is a common pool of assets, put together by a large number of investors who choose to purchase assets, stocks, bonds or others.

The investment fund can be open-ended or closed-end:

Open-end investment fund – issues new shares as more money are added into the fund and redeems the shares and investors pull their assets out. They are priced once, each trading day.

Closed-end investment funds – are traded on an exchange and they only have a fixed number of issued shares.

Steps for starting an investment fund

  1. The investment fund can have a clearly defined business strategy and it is recommended to take the time to differentiate the investment platform from others on the market. For example, investment fund owners can target on an individual business sector or narrow down the addressed market.
  2. Choosing the jurisdiction in which to incorporate the fund is an important step. Investors will commonly look for a good regulatory regime, stability, low tax regime, investor protection and other traits.
  3. Investment funds can be set up in a number of ways but they will typically take the form of a private or public limited liability company or limited partnership. Some countries with a well-developed financial sector may offer differed approaches to the setup of an investment fund.
  4. Investment funds need to comply with a complex regulatory regime and the compliance requirements are even more complex for cross-border mutual funds.

    In Europe, for example, the Alternatives Investment Fund Managers Directive or AIFMD is the law for the financial regulation applicable to hedge funds, real estate funds and other AIFs. Country-specific investment fund regulations are applicable throughout the world and in most cases, the regulations are in close relation to the relevant capital market laws and principles.
  5. Investment funds are a facile and professional manner in which investors can gain access to a variety of assets. The information included in this guide is merely general counseling and cannot substitute professional investment advice.

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