Most Attractive Countries for Opening Investment Funds
Although each country can offer an attractive investment field, there are certain jurisdictions that provide the best conditions for starting a hedge fund or another type of investment vehicle. Their ranking is directly linked to various characteristics, which can be related to the wide range of the investment funds that can be set up following the applicable legislation, the taxation regime, the investment incentives available for foreign investors, or the ease of fund domiciliation.
Luxembourg is the top investment destination at a European level. Luxembourg’s economy is mainly based on financial services and investors interested in how to start a fund can choose from a wide range of investment vehicles, addressed to all types of investors. The first investment fund in Luxembourg was registered in 1959, being the first European country to establish an investment structure.
The Luxembourg investment market is characterized by three main investment pillars, represented by investment vehicles set up as UCITS, alternative investment funds, and funds dedicated to responsible investments. The investment legislation is created in such a manner that it can welcome all types of local and foreign investors, such as institutional, retail, or qualified investors.
Some of the most appealing investment fund destinations in the world are presented in the infographic below:
2. The Netherlands
The legislative framework applicable to investment funds in the Netherlands is structured on regulations for UCITS and AIFs. The legislation in the Netherlands follows the directives of the European Union (EU), as the jurisdiction is a member state of the Community. The Dutch region also implemented the Alternative Investment Fund Managers Directive, which regulates the registration and activity of hedge fund startups and other similar investment vehicles.
Depending on the type of fund registered in this country, the investors can benefit from certain exemptions regarding the compliance with the tax system and licensing requirements. For example, in the case of the management services provisioned to alternative investment funds (AIFs), the managers will not need to obtain a license, in the situation in which the value of the assets under management is not above EUR 100 million.
Those who are interested in how to open an investment fund in the Netherlands can choose from several legal entities – funds in this country can be registered under both corporate entities and non-corporate entities. Investment vehicles may be registered as limited liability companies (private or public), investment companies with variable capital, cooperatives, limited partnerships, or as funds for joint account.
The fund for joint account in the Netherlands defines a structure that is registered by signing a contractual agreement between the investors of the fund, the fund custodian, and the fund manager. It is important to know that the fund for joint account may be set up as a transparent or non-transparent entity, which is taxed following different regulations.
3. Setting up an investment fund in Ireland
Although traditionally speaking, Ireland was not the main destination for investment purposes, the measures taken throughout the years by the local authorities have turned the country into one of the leading financial centers in Europe. Investors who are interested in hedge fund startups are advised to choose Ireland as their investment destination as, at the moment, the country is one of the main hedge fund sources across Europe.
From a statistical point of view, investors should know that the country is the home to more than 900 fund managers, residents in more than 50 jurisdictions; more importantly, a wide proportion of the international fund managers have set up an Irish investment fund (17 out of 20). At the level of 2017, the Irish investment market was characterized by a large proportion of assets held under UCITS funds (EUR 1,831 billion), while the total value of EUR 566 billion was held in AIFs.
In Cyprus, foreign businessmen can set up investment funds under the regulations referring to alternative investment funds (AIFs) and undertakings for collective investment in transferable securities (UCITS). The AIF can be registered under one of the following legal structures, which can be detailed by our team of affiliates in Cyprus:
fixed capital investment company – it can be set up with a share capital that can not be modified;
variable capital company – this type of company can be selected when starting an AIF, but it can also be registered for UCITS structures;
limited partnership – it is registered by one or more partners who have unlimited liability and one or more partners who have limited liability for the partnership’s financial debts;
common fund - it is set up under a contractual document – the Common Fund Rules contract.
Investors interested in how to start a fund can choose Panama as their fund domiciliation due to its favorable tax regime. The top investment fields available in Panama are the following: the financial sector, the tourism industry, and the real estate industry. Panama provides a solid legal framework, as well as numerous tax exemptions.
One of the main reasons for setting up an investment fund in Seychelles refers to the fact that the country is one of the fastest developing economies at a global level. Just like Panama, Seychelles is recognized for its solid banking industry. At the same time, it represents an attractive jurisdiction for the registration of offshore businesses.
It is important to know that Seychelles applies the regulations prescribed by the Organization for Economic Cooperation and Development (OECD).
7. Hong Kong
Hong Kong is a top destination for business purposes in Asia, providing numerous tax advantages for foreign businessmen. Investors interested in hedge funds startups in this country should know that the local economy is also represented by banking activities and offshore companies. Funds related to the banking industry in Hong Kong are allowed to perform business activities in numerous currencies and it is necessary to mention that investors will be exempted from paying the taxes on capital gains, dividends, or on the profits obtained from overseas trading.
The video created by our financial specialists offers more details on the top jurisdictions for setting up an investment fund:
Another top destination for investment purposes is Singapore, where foreign investors can benefit from the most attractive conditions for private wealth management services. It is necessary to mention that this sector is estimated to grow by 2020, becoming the world-leading jurisdiction. At the same time, it also represents a top destination for infrastructure investments.
9. Why start an investment fund in Malta?
One of the most important investment fund jurisdictions in Europe is Malta. The Investment Services Act is the main law providing for the creation of an investment fund and which also transposes various EU directives that provide for the extensive protection of investors.
Malta is open for both local and foreign investors who want to set up various types of funds, including hedge fund startups which are currently some of the most popular types of funds in the world. Another important advantage that takes Malta to the top investment destinations in Europe is the taxation system applicable. Among the benefits worth mentioning are the fact that foreign investors can take advantage of tax exemptions if at least 85% of the underlying assets of the respective fund are located outside Malta. Moreover, there are no net asset value tax, no dividend taxes, no stamp duty or capital gains taxes on the sale of shares under specific conditions.
Apart from these, Malta offers a wide variety of legal entities that can be used as investment vehicles.
If you need more information on how to start a hedge fund or any other type of fund in Malta, our affiliates there can provide the necessary details on the procedures that need to be respected.
10. Switzerland – a top investment fund destination
One of the most appreciated financial centers in the world, Switzerland, is also an ideal destination for the establishment of an investment fund. With some of the most advanced financial policies in the world and a stable economic and banking systems, Switzerland is by far one of the most appealing investment fund destinations in the world for EU and non-EU investors, even if it is not a member state of the EU.
The most important advantages of Switzerland are represented by the variety of investment funds that can be set up here. Among these, we mention the following:
- open-ended investment funds which are popular in entire Europe, thus easy to set up;
- closed-ended investment funds which are suitable for initial coin offerings (ICOs);
- equity, money market funds and hedge funds which offer many benefits to the investors;
- real estate funds (REITs) which are quite popular at the European level.
It is also possible to create cryptocurrency investment funds in Switzerland for those interested in operating in this sector.
11. Liechtenstein as a top investment fund destination
Another appealing investment fund destination in Europe is Liechtenstein. Just like Switzerland, Liechtenstein is not an EU member state, however, it adopted the Alternative Investment Fund Manager Directive (AIFMD) which is applicable at the EU level thus offering the opportunity of setting up investment funds under the rules imposed in the Union’s member states.
In the past few years, the investment fund legislation in Liechtenstein has undergone important changes in order to accommodate EU regulations which made it easy for investors from these countries to operate here. More importantly, those who operate investment funds in the Principality can also operate in other EU states directly through the passporting regulations which no longer require the registration of the respective fund in the country it wants to operate.
Liechtenstein also offers several types of investment vehicles that can be used for the creation of funds, and among these, the contractual investment fund the collective trust and the investment company are the most popular.
12. Other offshore destinations for the creation of investment funds
Not all foreign investors choose to open investment funds in onshore destinations, as offshore jurisdictions are just as appealing for this type of venture. Among the most important offshore states in which one can set up an investment fund under advantageous conditions are Bermuda, Mauritius, the Cayman Islands, the British Virgin Islands, and Jersey.
If you need information on how to start a hedge fund in any of these jurisdictions, we have specialists who can advise you.
13. Why set up an investment fund in Bermuda?
Bermuda is one of the recognized offshore investment fund destinations of the world as the legislation here allows the creation of various types of funds under very advantageous conditions.
The following types of funds are available for registration under the Investment Funds Act:
- administrative funds;
- institutional funds;
- specified jurisdiction funds;
- standard funds.
When it comes to the reasons why it is worth selecting Bermuda as an investment fund destination, it should be noted the low minimum investment requirement for each investor which is set at 100,000 USD. Investors can increase the amount they participate with after the fund is incorporated.
Our affiliates in Bermuda can offer more information on the substantial requirements for setting up an investment fund here. Moreover, if you are wondering about how to open a hedge fund startup, you can obtain detailed information from our specialists.
14. The UAE – an appealing destination for professional investors
The UAE is mainly known for its thriving economy which is based on the oil industry, however, the country is also an appealing destination for those interested in creating investment funds, as the government is trying to switch from a single-based sector to multiple ones, as the financial sector is among the ones the central authorities are encouraging.
Apart from the national legislation which enables the creation of investment funds in Dubai or Abu Dhabi, there are also special free zones, such as Dubai International Financial Centre (DIFC) which is dedicated to professional investors in the financial industry. Here, the advantages are multiple, especially for foreign investors who can benefit not only from some of the best financial sector regulations in the Middle East but also from some of the most appealing tax incentives, such as exemptions for up to 50 years upon the repatriation of profits.
If you are interested in setting up an investment fund in the Middle East, UAE can be your destination of choice. Here, you can benefit from the experience of our affiliates who can help you with all the procedures related to the creation and launch of your investment fund.
15. The USA – Delaware is a top investment destination
Those who consider the United States as their main option for setting up an investment fund should look into Delaware a top destination among professional investors from all over the world.
In Delaware, hedge funds are the most appealing types of investment funds thanks to the fact that investors benefit from many tax advantages. Moreover, investment companies administering funds can also benefit from various tax exemptions under the Securities Act and the Investment Company Act, which date back to 1933, respectively 1940, thus making the US one of the first jurisdictions in which the creation of investment funds was made available.
Among the main reasons to choose Delaware for setting up an investment fund are:
- the fact that there are no income, sales, or property taxes in this jurisdiction;
- when created through a limited liability company, the founders will benefit from a higher privacy level compared to other jurisdictions;
- it is possible for a single investor to create the fund under a limited liability company;
- low registration taxes.
If you have any questions related to the creation of an investment fund in Delaware, you can discuss it with our specialists there.
How to choose a country to open an investment fund in
When choosing an investment fund destination there are various factors to consider. Among these, one of the most important aspects refers to selecting between an onshore and an offshore destination. There are plenty of countries that offer similar registration conditions, however, when it comes to the legislation some are most friendly when it comes to the requirements.
The share capital and management requirements are also among the most important aspects to consider when creating an investment fund. The contribution of each investor and the number of participants in the fund should also be considered when setting up a fund.
There is no concept of a bad or good country when it comes to the creation of an investment fund, as each state can respond to the needs of various categories of investors. Also, the tax regulations of each state can help professional investors choose a jurisdiction.
Foreign professional investors can benefit from various advantages when choosing a country to open investment funds in, as most states offer special conditions in terms of regulations and participation, but also in taxation.
What are the most appealing types of investment funds?
Even if each country has its own regulations on the investment funds that can be created, there are some types of funds that are more popular among investors. According to recent statistics:
- in 2018, mutual and exchange-traded funds had the highest net incomes of 143 billion USD;
- in the same year, deal offerings have increased by 1 billion USD;
- exchange-traded funds assets could reach 25 trillion USD by 2025;
- by 2030, China is expected to become the second-largest investment management market in the world.
Businessmen can discover more details on the above-mentioned countries, as well as on other top investment destinations, from our team of affiliates. Please contact us if you need assistance in setting up an investment fund in any of these jurisdictions. We will put you in contact with our local affiliates who will handle the entire procedure.