Original scientific paper
The position of (qualified) investors and new forms of investment according to the law on investment funds
Edita Čulinović-Herc
Abstract
The New Law on Investment Funds has changed the rules of the portfolio composition for some types of funds, and has regulated in detail the limits of investments that should be taken into account. It is based on the European model, provided by the so-called UCTIS III which harmonizes the law of open investment funds. Innovative is also the tailoring of funds according to the needs of the so-called qualified investor. These persons can no longer be identified with institutional investors because the concept includes physical persons having property and cash in the amounts prescribed by the law. However, the concept of qualified investor in Croatian law has not been harmonized with EU law because the Croatian legislator relates the concept only with property qualification (which has not been harmonized), while EU law requires the fulfilment of other conditions for the physical person. The loosely defined concept of qualified investor enables foreign qualified investors to break into the Croatian investment fund market although the criteria they fulfil are below the level of European law. When Croatia becomes a member of the EU, foreign fund managers will be able to offer their products on the cross-border basis, so that the definition of criteria which individual investors and fund products have to fulfil on the Croatian market is the basic prerequisite for the survival of Croatian funds when they enter competition on the common European market. Regarding the open funds invested by public bid which are directed to a wide range of investors, limited investments into individual permissible objects of fund investment are numerous and therefore not easily systematized. Due to their orientation to the public, and given the fact that the share document can be turned into cash at any time, investments of open funds by public bid are oriented towards the most solvent financial instruments (as a rule, max. 10% of the net value of a fund's property). In the case of closed funds by public bid, which are joint stock companies, the rule of max. 15% of the net value of fund property applies for bonds or instruments of the money market of a single issuer, although there are many exceptions. Closed funds have legal personality; they are included in the Register of Companies and have organs which are otherwise characteristic of joint stock companies. Such (public) joint stock companies have to be included in the stock exchange, which means that it is additionally open to public scrutiny. This is why the establishment and management of open funds seems to be simpler and cheaper, even more so because a fund management company can be in the form of a limited liability company although the original capital exceeds by far the amount which is necessary for the establishment of a limited liability company. Unless an open fund is a joint stock company, it is not admitted to the stock exchange. The open fund is burdened with less expanses from the start, so that it is a preferred choice for its managing company in the sense of its overall economic efficiency, while investors opt more easily for these funds because of the possibility of disbursement of the share document at any time. Since high profit funds based on individual capital, rather than financial conglomerates, have recently appeared in large numbers, the question is to what extent they can cope with funds based on the bank capital and to what extent they can neutralize the risks specific for this segment of the financial industry. The trend, however, is the entry of investment funds into the joint-stock structure which is evident from the data on 10 largest owners of bonds from the depository of SDA. It will be interesting to see to which extent the pressure «to maximize the fund profit» that fund managers are exposed to will be reflected on the management of joint stock companies into whose shares the fund has invested, especially if funds have a larger share in the original capital of a joint stock company.
Keywords
investment funds; qualified investors; UCITS III; Law on investment funds
Hrčak ID:
6428
URI
Publication date:
5.12.2006.
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