Investment Funds: Setting up and management

Investment Funds : Setting up and management

Do you wish to proceed with the setting up of an investment fund in order to attract investors? You know, of course, that whatever the jurisdiction  you choose, you will have to obtain an authorization or license in order to exert any fund raising activity.

Here are five questions about Investment funds that we are going to answer :

  • How does an investment fund operate ?
  • What are the requirements of the regulatory bodies?
  • What are the available jurisdictions for the registration of a fund ?
  • How long does it take to acquire a license?
  • What is the quickest structure in order to start up?

 

 

Read the page from top to bottom to discover how to start an investment fund more or less immediately.

How does an investment fund operate

Mauritius is the only jurisdiction which regroups the possibility of starting a fund with :

  • A capital of only 30.000 Euros
  • Within only 3 weeks
  • Which is open to all kinds of investment

Choose an investment fund on Mauritius

An investment fund is used to gather funds from clients. The fund is a company whose shares are allocated to « subscribers » (the investors).

The investors own shares in the fund, normally called « Class A shares », which give a property right equal to the investment realized.

Above this fund, ranks another company, whose function is as a Fund Adviser and which can be translated by « Adviser or Fund Manager ». Its role is to have the investment policy applied, to draft an information prospectus (brochure) aimed at investors, to edit subscription warrants and finally to commercialize the fund to the public. The Fund Adviser owns a single Class B share whose rights are to manage the fund. 

Here is an example of the structure of an investment fund.

fund invesment

What are the demands of a regulatory body ?

In order to set up a fund, it is appropriate to call on the services of a Lawyer, who is experienced in the domain, who submits a request for the registration of a fund by presenting with your help the following points:

  1. Information prospectus presenting the strategy
  2. Detailed financial business plan
  3. Demonstration of the experience of the founders and managers
  4. To belong to a regulatory body
  5. To have an available investment of 000€ à 1.000.000€ on average

 

What are the available jurisdictions for the registration of a fund ?

In the world of investment funds Luxembourg is the first country in the world in terms of the  number of investment funds with 3900 registered Funds and at least  13.800 « units », which are compartments or  « sub funds ». It is the world leader with 3.606 Billion (official source luxembourgforfinance.com) but the requirements are burdensome. Here is a rapid comparison that we thought would be useful of Luxembourg, Gibraltar and the Island of Mauritius.

In brief Luxembourg is the most famous jurisdiction for the creation of investment funds, on the other hand the conditions are strict and the setting up of the file can be long and reserved to people, who have experience acquired in Luxembourg or to delegate the complete management to local professionals registered for fund management.

Gibraltar is an interesting destination, although it is selective on its conditions, and the creation is limited to the activities of traditional investments, this allows the setting up of a fund with a lower initial injection than Luxembourg, and at the same time taking all the advantages of the Euro Zone.

The Island of Mauritius is an ideal compromise for investment funds between 100.000 and 50 million Euros thanks to its low cost of setting up, and the possibility of creating a compartment fund by sharing costs. (See below)

How long does it take to acquire a license ?

The setting up of a fund is done in two steps. The first part is the preparation of the file, and the drafting of the prospectus carried out by a legal specialist. Then once the company has been created, then follows the  registration of the agreements or licenses in order to be able to exert as a fund investment.

Luxembourg : 12 Months

Gibraltar : 8-12 weeks

Mauritius : 3 weeks

In  Luxembourg taking into account the complexity of the Law and the comprehensiveness of the criteria valuable for the drafting of an information prospectus, the legal part prior to the investment fund takes on average 8 to 12 weeks. The company can be set up in 2 weeks, then the CSSF (Luxembourg’s financial supervisory authority) takes about 6 to 8 months to grant an agreement.  We tend to say that what the Luxembourg authorities look at and examine is the experience of the fund managers, the study of the coherency of the financial validity of the project and the length of the CV with their experience trackable in Luxembourg. This timeline cannot be shortened in any way, a Luxembourg fund takes about 12 months to be up and running.

In Gibraltar, you can reasonably expect to take 8 weeks for a coherent setting up. Firstly, as the requests are  lower than in Luxembourg, and secondly, because the conditions are more flexible and less burdensome.

On Mauritius, finally once the project has been drafted, you can envisage a fund in about 3 weeks.  It is necessary also to precise that the authorities are more in favor to register funds for innovative or low capital projects in order to encourage the financial sector.

What is the quickest structure in order to start up ?

La Protected Cell Company is a type of company for investment funds, which is extremely useful regulated by the Law of the PCC Act 1995 on the Island of Mauritius, which allows an investment company (investment fund) to create legal compartments allowing several activities without any of the cells/compartments being affected by the other.

Here is an example of the structure of a compartmentalized investment fund (PCC).

fund scheme pcc

Recap of the advantages of a PCC

  1. Cost sharing
  2. Immediate availability
  3. Sparation of bank accounts
  4. Securisation of risks

 

If you wish to use a PCC or to launch your investment fund immediately, please contact us

A question ? a doubt ? send us your comments.

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