QIF Establishment Services
A qualified investors fund may be established as a self-managed or managed (externally) investment fund with legal personality and those without legal personality may set up a mutual fund.
Managed investment fund with legal personality
An investment company that has a licence granted by the Czech National Bank (CNB) manages this type of fund and provides all services related to the management and administration of the fund. In other words, an managed investment fund with legal personality is a fund that has an individual statutory body in the form of a legal person authorized to manage this investment fund and this person may only be an investment company.
Establishment and incorporation of such fund is quite simple and requires the following:
o Preparation of investment fund statute
o Signed management and depositary agreements
o Filing of an application for entry into the register maintained by the Czech National Bank (CNB)
The whole process of establishment of an investment fund with legal personality takes approximately one or two months and currently the investment company does not need to be granted approval anymore.
A mutual fund is established through a statute of a fund as well as the decision made by the founders regarding the appointment of a manager. A mutual fund comes into existence as of the day of registration in the register of mutual funds maintained by the Czech National Bank (CNB). The process of establishing a mutual fund usually takes up to one month.
Internally managed/Self-managed investment fund
Contrary to the above-mentioned type of a fund, a self-managed fund does not take advantage of investment company’s services (or just uses some of them) and it manages itself directly through its own management. Such fund must fulfil all legislative requirements (e.g. regarding personnel and technical equipment) and obtain a licence from the CNB. This process takes much longer than the foundation of a managed fund and it particularly depends on the preparation stage of the fund as well as its background.
Management and administration od QIF
Generally speaking, the management process may be divided as follows:
Management of an investment fund
Basically, it includes managing assets of an investment fund, making investments (portfolio management) as well as risk management. In term of a managed fund the management is conducted exclusively by an investment company. The investment company is also authorized to perform acts related to its status as the only board member of the managed fund with legal personality, including updates of the statute of the fund.
Administration of an investment fund
The administration of an investment fund embraces taking proper care of the administration process including regular reports submitted to the CNB and investors. As for the externally managed funds, the administration is provided by an investment company.
The administration mainly covers these activities:
o Provision of legal services and compliance,
o Evaluation of the property and debts of a fund,
o Calculation of the current value of a security issued by this fund,
o Maintaining the list of owners of securities issued by this fund,
o Ensuring issuance and redemption of securities issued by this fund,
o Execution and update of an annual report of the fund,
o Provision of information services for investors,
o Fulfilment of duties towards the Czech National bank,
o Fulfilment of duties towards the fund depositary and so on.
Communication with a depositary and custodian of an investment fund
Every investment fund has its own depositary. In the Czech Republic the depositary of an investment fund is almost always a bank that was granted an approval by the Czech National Bank to perform activities of a depositary, despite the fact that the Act on Investment Companies and Investment Funds provides for other alternatives.
The main activities of a depositary include in particular bookkeeping and cash flow control. The depositary is given the assets of the investment fund for safekeeping and is also responsible for the settlement of transactions and appropriate calculating the net asset value.
A depositary has oversight duties, which require it to perform ad hoc monitoring activities on the grounds of the regular reports of the investment company in the best interest of both an investment company and its investors.
A depositary closely cooperates with a fund manager and with a capital market regulator, i.e. the Czech National Bank.
Cooperation with expert institutions
On regular basis, a depositary evaluates the assets of a managed investment fund independently of the investment company and in compliance with the terms and periods set out through the legislation and the statute of the fund.
Cooperation with auditors
Every year a depositary ensures financial statements and annual report for each managed fund.
The above is just a basic description and a summary of activities carried out by funds. In some special cases certain processes may differ. Would you like to find out more about the operation of funds? Please do not hesitate to contact us.
Why invest with REDSIDE?
Professional asset management
Professional asset management is carried out by a licensed financial institution, which significantly enhances portfolio while keeping the risks at the same level, and at the same time a relatively high degree of liquidity maintained due to the fact that units of an open-ended mutual fund or shares issued by a joint stock company with variable registered capital may be redeemed at a current rate in compliance with the statute of the respective investment fund.
Effective Risk Diversification
Due to the fact that an investment company purchases various assets on a greater scale in accordance with the strategy of the fund, it diversifies the risks so that each shareholder is exposed to a much lower risk in comparison to investing as an individual. An investment company is also obliged to comply with the statutory investment limits for per one proprietary value of fund assets amounting up to 35 % of the total assets of the fund.
Combining portfolios of individuals into a collective portfolio allows more effective risk diversification. On the contrary, individual investors have only limited possibilities to diversify the risk owing to insufficient capital.
Lower Transaction Costs
In general collective investment institutions reach economies of scale so that investors may take care of their savings efficiently at a lower cost, i. e. in comparison to individual investing.
Investment company REDSIDE in cooperation with ASB Group offers a wide range of services, which also significantly contributes to saving investors’ costs as well as time.
A Wide Range of Funds
The enactment of Act No. 240/2013 Coll., extended the legal entities (persons), which may newly acquire qualified investors funds, in particular:
- Mutual fund
- Limited partnership company with investment certificates
- Limited liability company
- Joint-stock company
- Joint-stock company with variable registered capital (SICAV)
- European company
There is such a wide range of funds that they may differ in their legal status, investment focus, risks or investment horizon. So investors can choose just the right fund that best suits their investment objectives.
The Management of Your financial means is completely transparent because the company is under the strict supervision of the Czech National Bank and is obliged to submit regular monthly reports on the status of portfolios. In addition, the depositary carries out monitoring of cash flow in terms of monetary accounts and provides ex post approval of objectives related to investment so as to ensure the compliance with the whole investment strategy of the fund.
The investment company is also, pursuant to the effective legislation, obliged to ensure regular evaluation of the assets of the funds and draw up an annual report, which is always audited by a renowned audit company.
As an investment company we provide all our clients with regular information on the performance and economic results of managed investment funds.