New types of Danish alternative investment funds

The two new types of alternative investment funds are not subject to any investment restrictions and may therefore invest in all asset classes, including loans, real property and other tangible assets. This represents a significant advantage compared to the existing Danish capital associations, which may only invest in financial instruments covered by the Danish Financial Business Act.

Like capital associations, both AIF-SICAV Funds and AIF Securities Funds benefit from a robust legal regime authorising the establishment of sub-compartments (potentially with different unit classes) with separate liability, investment strategies, investors, portfolio managers/investment advisors, etc. within the same alternative investment fund. The fact that fund sponsors can promote different investment strategies to different investors within the same alternative investment fund (with one board of directors, one set of Articles of Associations, one alternative investment fund manager and one depositary) represents a cost-saving benefit.

Whereas the AIF-SICAV Fund is a separate legal person, the AIF Securities Fund is not. The AIF Securities Fund is deemed part of the legal entity - in the form of a Danish alternative investment fund manager - which has established the fund.

An AIF-SICAV Fund may be managed by a manager of alternative investment funds or by an investment management company authorised to manage alternative investment funds in Denmark or another EEA Member State. However, only a Danish alternative investment fund manager can establish and manage an AIF Securities Fund.

Purpose of the new funds

These two new types of alternative investment funds are introduced to contribute to an increase in exports of Danish asset management services and facilitate easier access to capital for businesses

In practice, investment firms or alternative investment fund managers may use an AIF-SICAV Fund or an AIF Securities Fund - divided into sub-compartments each representing an asset class to be offered to investors (e.g. shares, bond, real property and alternatives) - as a joint investment vehicle through which each individual investor can be offered investment exposure tailored to the varying needs of the investor over time, managed through a portfolio management agreement entered into between the investor and the investment firm or alternative investment fund manager. The sub-compartment structure will allow the asset manager to easily redeem units in one sub-compartment (representing one asset class) and use those funds to invest in another sub-compartment (representing a different asset class) when changing the asset allocation of an investor.

The article can also be read in our Investor Update 2018 Q1.