Eternity Law International — News — Investment fund in Spain

Investment fund in Spain

Published:
August 5, 2024

Certain operational features and commercial significance make investment fund Spain attractive instruments for collective investment, combining profitability, risk management and ease of access for investors. Spain is one of the world jurisdictions that has created the most favorable conditions for the establishment of such structures, in particular, thanks to the comprehensive support from the state apparatus.

Our company is professional experts in the field of launching and licensing businesses. We are focused on achieving the most effective results for our clients. Our lawyers will provide you with comprehensive consulting and practical support in obtaining an investment fund license in different countries of the world.

Spain investment regulations: features of opening and functioning

Before discussing the process of starting a fund in Spain, it is important to understand their constituent elements and benefits.

  1. Investment fund shares: Shares are shares into which an investment fund is divided. Their number varies depending on purchase and sale transactions, called subscription and repurchase, respectively.
  2. Participants of Spain investment funds: investors who invest their funds in the fund become its participants in proportion to their investments. Participants can join the fund at its inception or later, and can withdraw from it at any time, receiving their investment back.
  3. Net Asset Value (NAV): it’s the price of a fund’s shares on a specific date. It is calculated as the fund’s total assets divided by the number of shares outstanding.

Benefits of Spain investment funds

  1. Tax benefits: IF taxation is favorable for investors, since taxes are levied only at the time of redemption of shares. Losses can be offset over the next four years through capital gains.
  2. High liquidity: Investment funds allow investors to withdraw their funds at any time, which ensures high liquidity.
  3. Professional management: funds are managed by professional managers and analysts, which guarantees more efficient asset management compared to individual investments.
  4. Diversification: investing in an investment fund allows you to achieve greater diversification, since the total capital of the fund makes it possible to create a diverse portfolio, which reduces risks.
  5. Regulation and safety: the funds are regulated by the Law and Regulations of Collective Investment Institutions, and their activities are monitored by the CNMV Commission (Comisión Nacional del Mercado de Valores), which protects investors from unscrupulous actions of managers. Depository organizations also monitor the actions of management companies.
  6. Accessibility: Buying IF shares is a simple procedure, accessible through banks, by telephone or online. Investments are available even for small investors, as they do not require large amounts to enter.

Spain fund registration: main stages

If you intend to open and implement Spain fund management, you need to remember to go through the following steps.

  1. Determining the type of fund. Select a fund type, such as stocks, bonds or mixed assets.
  2. Registration of the fund. Register the fund with the CNMV by submitting all the necessary documents.
  3. Appointment of a management company. Hire a licensed property management company with relevant experience.
  4. Selecting a depository organization. Determine a depository organization to control the actions of the management company and ensure the safety of the fund’s assets.
  5. Development of investment policy. Formulate an investment strategy, including goals, risk tolerance, and types of assets to invest.
  6. Marketing and attracting investors. Develop and implement a strategy to attract investors to the fund.
  7. Ongoing management and reporting. Ensure regular management of fund assets, regulatory compliance and transparency for fund participants.

By following these steps and considering the benefits of mutual funds, you can create an effective investment vehicle that will benefit both managers and investors. Our lawyers will accompany you at each stage, taking on all the difficulties. We also have many ready-made options, in particular, we can offer you an alternative investment fund for sale in the Czech Republic and much more.

Management company for investment fund

The management company can be either an individual or a legal entity. The main task of this company is to effectively manage the fund’s assets to achieve profitability. It is important to note that the management company is not the owner of the fund; the owners remain the fund participants. The management company is responsible for determining the investment strategy and allocation of the fund’s assets.

Typically, each fund is managed by one management company, which may also manage several funds simultaneously. Company managers receive a fee for their services, known as a management fee. They are required to regularly report to the National Securities Market Commission (CNMV) and monitor the fund’s assets. Management companies are supervised by the CNMV and must be approved by the Ministry of Economy in consultation with the Commission.

Launching an investment fund in Spain: comparison with SICAV

SICAV is a self-governing type of collective investment institution (CII) that takes the form of a public limited company. The difference between SICAV and other CIIs is that it is a corporate structure and not a fund. In SICAV, investors act as shareholders, as opposed to participants in an investment fund. The purpose of SICAV is to manage shareholders’ capital and increase it through investments. SICAV is regulated by both Law CII 35/2003 and the Capital Companies Law.

SICAV can act as an investment company and manage its assets independently or through an outsourced manager. However, there is a limitation: SICAV assets cannot exceed the initial capital by more than 10 times. For example, if the initial capital is 2.4 million euros, the maximum amount of assets should not exceed 24 million euros.

Similarities between SICAV and IF

  1. Regulation: Both types of funds are regulated by the National Securities Market Commission (CNMV).
  2. Risks and diversification: Both types of funds allow you to choose the level of risk and degree of portfolio diversification. Investments cannot be concentrated in one asset.
  3. Number of participants: the minimum number of participants for an investment fund is 100, for SICAV – 100 shareholders.

Differences between SICAV and IF

  1. Form of organization: SICAV has a corporate structure, while an IF is a pool of assets.
  2. Investors: In SICAV, investors call themselves shareholders, and in investment funds, participants.
  3. Asset restrictions: SICAV has asset restrictions that cannot exceed 10 times the initial capital, unlike investment funds where there are no such restrictions.
  4. Minimum capital: The IF requires a minimum capital of EUR 3 million. To create a SICAV, a minimum capital of EUR 2,400,000 is required.
  5. Management structure: SICAV operates as a public company with a board of directors that makes decisions on investment strategy and fund management. Investment funds are managed by a management company, which carries out all operational functions.
  6. Form of participation: in SICAV, investors become shareholders by purchasing shares of the company. In investment funds, investors open an account with a management company that manages the fund and its investments.
  7. Taxation: SICAV is required to pay tax at the rate of 1% of its net profit for the year. In terms of Spain investment fund taxation, it should be said that investors in investment funds face higher tax rates: 19% on income up to 6,000 euros, 21% on income from 6,000 to 50,000 euros and 23% on income above 50,000 euros.

Spain fund administration: key privileges this structure provides

  1. Taxation: IFs provide favorable tax conditions. Taxes are paid only when shares are redeemed, and losses can be compensated within four years.
  2. Liquidity: funds offer high liquidity, allowing you to manage your funds quickly and easily.
  3. Professional management: Fund assets are managed by professional managers and analysts, which provides more efficient management compared to individual investments.
  4. Diversification: Investing in funds allows you to achieve broad diversification by pooling the funds of all participants, which helps reduce risks.
  5. Security: funds are subject to strict control and regulation by the CNMV, which protects investors from fraud and managerial misconduct.
  6. Accessibility: Purchasing fund shares is a simple and accessible process. Investments can be made through a bank, by phone or online, allowing you to start with small amounts.

Our company’s specialists are ready to provide full consultations on issues of the option to get a successful Spain fund setup and help with the preparation of all necessary documents. We will also provide you with professional support when registering an investment fund in SVG, in Lithuania, Malta, Cyprus and other countries.

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