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Alternative Investment Fund (AIF) in the European Union

Small Alternative Investment Fund

Registration of a Small Alternative Investment Fund (AIF) in the European Union allows capital management up to 500 million EUR with the ability to attract deposits from retail and professional investors. AIF can manage a portfolio of virtual currency, real estate, bonds, stocks, derivatives and other alternative types of investments. Depending on jurisdiction on average it takes only up to 2-3 months to set up full infrastructure (the management company, an alternative fund; obtain an operating license) with relatively low costs. An additional advantage – data anonymity of fund investors (list of investors is not public and stored within the fund manager).

EU Directive
The European Union Alternative Investment Fund Managers Directive (AIFMD) has provided investors and fund managers with a highly efficient mechanism for creating and promoting investment products. Unlike collective investment funds, alternative investment funds can only invest in one asset or in a small number of assets and are therefore considered as alternative investment funds within the meaning of the Alternative Investment Fund Managers Directive
Specification
By acquisition of investment passport in one of the EU member states, a small alternative fund obtaining the right to operate throughout the entire European Union. Typically, these funds are hedge funds; capital construction funds; real estate funds; digital assets funds; private investment and other alternative types of investment
Favorable hubs
There are several favorable hubs in the EU for registering an alternative investment fund: Estonia, Luxembourg, Malta, Ireland and the Netherlands. Each jurisdiction has its own characteristics and advantages despite that local regulations are based on the generally accepted EU Directive. In order to select the right jurisdiction, AIF founders have to conduct a preliminary analysis or receive a full legal opinion that will consider individual features. In 2017, Luxembourg has been registered 14,000 Funds (including sub-funds) with 4 trillion EUR under management, while Ireland had approximately 7,500 funds including 2,200 AIFs managing over 2 trillion EUR
Functioning principles
The commercial activities of AIFs are subject to relevant requirements and transitional provisions, depending on several factors, including the specifics of each individual EEA state in the marketing and/or management of AIFs. A small alternative fund manager is a management company that directly or indirectly manages alternative investment funds (AIFs) have to meet the following criteria:
1
1
The total assets of the fund (including borrowed funds) do not exceed 100 million EUR
2
2
The total assets do not exceed 500 million EUR, provided that the AIF portfolio consists of AIFs without attracted assets and that the redemption right cannot be exercised within five years after the date of investment

An alternative investment fund does not have the right to make a public offering, and as a result, the fulfillment of minimum one of the following conditions is mandatory:

Investments are offered only to professional investors (banks; holding companies, savings institution, trust companies, insurance companies, financial service loan companies, pension or profit-sharing trusts or other financial institutions)
OR
The fund attracts a maximum of 150 retail investors in one member state of the European Union
OR
he total amount of funds raised from investors must be less than 2.5 million EUR per calendar year
OR

Preparation of statutory documents

In order to prepare statutory documents for a small alternative fund, the Client must formulate the following provisions:
  • Investment policy of the fund: the used currency of the fund; type of investments (real estate, virtual currency, stocks, other derivatives); duration of the investment (short-long term); the geography of investment markets; and strategy assessment by risk level
  • Fees: management fee; success fee; exit fee and expenses (accounting, compliance, etc.)
  • Internal organization of the fund management: bank account; market entry channels (for example, brokerage companies or other); the person in charge of managing the assets; the person in charge of attracting and interacting with investors; AML department
  • Тarget market of the Clients (investors): Client profile (retail / professional investor); entry investment amount requirements; geography (by country); the planned number of investors in the first year
  • Investor onboarding/exit condition and profit distribution: frequency of investors entry; frequency of profit distribution; entry limitations/restrictions; forced redemption of shares)

We are working directly with the following regulators

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FSA
Financial Supervisory Authority of Estonia
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FIU
Estonian Financial Intelligence Unit
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CBN
Czech National Bank
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Bank of Lithuania
Lithuanian Central Bank
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CBI
Central Bank of Ireland
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BaFin
Federal Financial Supervisory Authority (FFSA) of Germany
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FCIS
Financial Crime Investigation Service
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GFSC
Gibraltar Financial Services Commission
Each European state jurisdiction has its own characteristics and advantages even though local regulations are based on the generally accepted EU Directive. In order to select the right jurisdiction, AIF founders have to conduct a preliminary analysis or receive a full legal opinion, which will consider individual features. Gofaizen & Sherle assists in the analysis and selection of the optimal EU jurisdiction, depending on your wishes, the concept and strategy of Alternative Small Investment Fund to be established, registration of the management company and the fund itself, as well as prepares the necessary package of documents for filing an application for a license and communicates with the regulator until the tasks are completed. Please, fill out a feedback form below for a free consultation.

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Estonia: Tartu mnt 53, 10115 Tallinn
License for operating activity: FIU000407
Gofaizen & Sherle UAB
Gofaizen & Sherle OÜ
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