Mutual Funds in the Netherlands
Updated on Wednesday 10th July 2024
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A mutual fund in the Netherlands represents a type a vehicle with a long tradition on the local market. Investors interested in how to start a fund in the Netherlands can set up this type of vehicle, which is generally used for maximizing the return on investment. The investors pool their financial assets and invest in financial tools such as bonds and stocks and they are entitled to own shares within the respective fund.
Types of investment funds in the Netherlands
At the moment, foreign businessmen may set up their financial operations in the Netherlands through numerous investment funds, including hedge fund startup. In the case of a mutual fund, the investors may choose from the following types of funds:
• equity funds;
• bond funds;
• money market funds;
• specialty funds;
• retail mutual funds.
One of the main advantages when setting up a mutual fund in the Netherlands refers to the types of strategies that investors may apply. For example, in a mutual fund, investors may develop growth-oriented strategies, which have as a main purpose the accumulation of capital. Another way of investing in a mutual fund is through income-oriented investment strategies, which are carried out in order to provide a stable income.
Starting a mutual fund in the Netherlands
The procedure of setting up a Dutch mutual fund implies several steps. Those interested in such a venture will usually consult with financial advisors with respect to:
- the best legal form to adopt;
- the appointment of the fund managers;
- the necessary licenses;
- the types of assets to invest in;
- the best investment strategy;
- taxation of the fund.
Our affiliates can offer guidance in all the matters presented above. Additionally, they can also help you understand how to create a hedge fund startup in this country.
Legal entities under which you can establish mutual funds in the Netherlands
A mutual fund pools money from investors to buy stocks, bonds, and other assets. It is also used to build a portfolio that is more diversified than the typical investor could do on their own. Professional fund managers buy securities on your behalf through mutual funds.
A businessperson looking to establish a mutual fund in the Netherlands has a few legal forms to select from, among which:
- Public limited companies ( NV) and private limited liability companies (BV) are both corporate entities. The NV is eligible for local stock exchange listing.
- Limited partnerships (CV), as well as funds for joint accounts (fonds voor gemene rekening, or FGR), both of which are not entities with legal personality.
Investors with a focus on real estate and private enterprises choose the CV, while those looking to engage in actively traded assets favor the latter. An agreement between the investors, management, and owner that may be a foundation governs the fund for joint account.
When selecting the type of vehicle for mutual funds in the Netherlands, it is advised to keep the following factors in mind:
- the BV and BV are typically chosen equally since they both provide comparable benefits and the ability to issue shares;
- the investment company with variable capital (ICVC), which is well-liked by European investors, can also be formed using the NV;
- the ICVC may be utilized to establish umbrella funds that hold numerous sub-funds issuing a variety of shares;
- the cooperative and limited partnership are comparable in that neither requires share capital to be established.
If you want to know more about how to start a hedge fund, our Dutch affiliates can advise you.
Types of mutual funds in the Netherlands
The main advantage of choosing the Netherlands as an investment destination if you are a professional investor is that there are several types of mutual funds that can be registered here. These are:
- money market funds that allow investments in high-quality, short-term securities issued by national companies and the government (they allow for low-risk investments);
- bond funds that have higher risks than money market funds, however, they can invest in a wide range of instruments with a possibility of generating high returns;
- stock funds that usually invest in stock issued by corporations.
Mutual funds in the Netherlands usually follow and respect international regulations, and they rely on a very well-regulated legal framework.
Mutual fund management in the Netherlands
One of the most important aspects of setting up a mutual fund in the Netherlands is its management. This occurs because investment funds must comply with the Alternative Investment Fund Manager (AIFM) Directive. According to this law, the fund manager cannot exercise any of its duties without a license.
For licensing purposes, the fund manager must comply with the following requirements:
- have experienced and trustworthy members on the board;
- have a depositary appointed at the time of filing for the license;
- be solvent;
- meet the capital requirements in accordance.
The Dutch Financial Markets Authority has very strict regulations when it comes to the licensing requirements imposed on fund managers. For those interested in a more relaxed jurisdiction, we can recommend the Cayman Islands on which we have various articles. In our magazine, you can discover the Cayman SPC or Segregated Portfolio Company under which it is possible to set up various types of investment funds.
Types of investors Dutch mutual funds can address
When deciding how to start an investment fund in the Netherlands or any other jurisdiction, one of the key takeaways is the type of investors it will address. Generally speaking, they are divided into professional and non-professional ones/qualified and unqualified ones.
Dutch mutual funds are created to cater to the needs of professional investors. However, the Netherlands also enables foreign funds to operate on its market, cases in which non-EU/EEA funds can address qualified investors. Either way, such investment funds cannot be marketed to persons or companies that do not know how financial markets operate.
What are the benefits of investing in Dutch mutual funds?
Diversification is one of the main advantages offered by mutual funds in the Netherlands. They also provide other opportunities for making money:
- through dividends;
- through the distribution of capital gains.
Also, mutual funds address a wide range of investors from small or individual ones to diversified, professionally managed portfolios for professional ones.
If you need more information on the available types of mutual funds in the Netherlands, do not hesitate to rely on the expertise and experience of our local partners.
History of the Dutch mutual fund
Foreign investors are strongly advised to set up their investment operations in the Netherlands through a mutual fund, as this type of fund is well rooted in the financial activities carried out in this country. Investors interested in how to set up an investment fund in the Netherlands should know that the vehicle was first used in this country in the late 1700s.
The first mutual fund, named “Unity Creates Strength”, was incorporated with the purpose of gathering small investors to perform diversified investment strategies. The investors had the opportunity to hold their financial assets in other European countries.
The investment funds sector in the Netherlands
The investment funds sector is part of the financial sector, which in the Netherlands is quite developed. According to recent statistics issued by the Dutch National Bank for the first part of 2024:
- the total assets managed by Dutch investment funds surpassed EUR 750 million;
- the largest value of invested assets belonged to pension funds and had a total value of EUR 443.86 million;
- the total number of funds operating on the Dutch market was a little over 1,400;
- out of them, the largest number of funds were equity funds – 359.
Investors interested in opening a fund in this jurisdiction should know that the Netherlands represents a top destination for the domiciliation of mutual funds, for matters concerning the taxation of the vehicles or the regulatory framework. Please contact our team of affiliates in the Netherlands for more details on the registration of a mutual fund.