In 2024, the volume of assets under management by investment funds in Europe, Asia, and Africa exceeded $120 trillion, a figure comparable to the combined GDP of the world’s leading economies. However, according to ESMA and MAS, up to 40% of private investors face legal and tax challenges when entering international markets, and every third entrepreneur loses up to 15% in returns due to mistakes in choosing the jurisdiction and structure of the fund.
These questions become particularly acute for private investors and financial directors seeking international expansion and business scaling through investment funds.
In this article, I, Nikita Veremeev, founder of COREDO, unveil the strategic and practical aspects of working with funds in the EU, Asia, and Africa, from registration, choice of jurisdiction and legal structure to performance evaluation and the implementation of innovative tools.
Investment Funds for Private Investors
Investment funds: these are legally formalized structures that pool the resources of private and institutional investors for collective capital management and asset diversification. For a private investor, this is an opportunity to access professional management, reduce individual risks, and expand geographical investments without the need for independent analysis of dozens of tools and jurisdictions.
Types of Investment Funds
- Open-ended investment funds (mutual funds, UCITS): allow investors to enter and exit the fund at any time at the current unit price (NAV).
- Closed-end funds: fix the investor composition at the launch time, units trade on the secondary market, liquidity is limited.
- Interval funds: allow entry/exit at specific periods, reducing portfolio volatility.
- ETFs for private investors: exchange-traded funds with high liquidity, transparency, and minimal fees, optimal for passive strategies.
- Venture funds for business: specialize in investing in startups and innovative projects, requiring a long-term horizon and high risk tolerance.
- Real estate funds: allow investments in commercial and residential properties, ensuring stable cash flow.
- Sustainable development funds (ESG): oriented towards environmental, social, and governance criteria, increasingly in demand among institutional investors.
- Islamic investment funds (Shariah-compliant): comply with the principles of Islamic finance, popular in Asia and Africa.
Comparison of Investment Fund Types
| Fund Type | Minimum Threshold | Availability for Private | Liquidity | Jurisdiction | AML/KYC Requirements |
|---|---|---|---|---|---|
| Open-ended | Low | High | High | EU, Asia | Standard |
| Closed | Medium/High | Medium | Low | EU, Asia | Enhanced |
| ETF | Low | Very High | Very High | Global | Exchange |
| Venture | High | Low | Very Low | EU, Asia | Enhanced |
| ESG | Medium | Medium | Medium | EU, Asia | Standard |
| Islamic | Medium | Medium | Medium | Asia, Africa | Specific |
Who are Suitable for Mutual, Open-ended, and Closed Funds
The choice of fund depends on the goals, investment horizon, allowable risks, and liquidity requirements.
- Closed and venture funds require substantial capital (from $100,000), often targeted at family offices and institutional investors.
- Institutional vs. private funds: institutional funds offer more complex strategies but require strict compliance and Due Diligence.
- Family offices use funds for scaling investment portfolios, optimizing tax burdens, and transferring capital.
Registration of an Investment Fund: Legal Nuances
Registering an investment fund is a process that requires accurate compliance with international standards and consideration of jurisdiction specifications. COREDO’s practice confirms: a well-chosen country of registration and corporate structure can significantly reduce tax and legal risks, ensure transparency for investors, and comply with regulatory requirements.
Registration of Funds in the EU, Asia, and Africa
- Choosing a jurisdiction for the fund
Criteria: fund’s tax residency, corporate structure requirements, transparency of reporting, level of investor protection. In the EU, popular choices are Luxembourg, Ireland, Cyprus, Estonia; in Asia, Singapore, Hong Kong, UAE; in Africa: Mauritius, South Africa.
- Registration of the investment fund
- Preparation of constitutional documents, investment memorandum, management structure (investment committee, custodian, sub-advisor).
- Submission of documents to regulatory authorities (ESMA, MAS, SEC), undergoing the reservation procedure for the fund’s name, approval of the charter, and corporate structure.
- Obtaining a license, account opening, appointment of a corporate secretary and local director (e.g., in Singapore, at least one resident director is required).
- Tax residency setup, registration at the operating location.
- Legal support for investments
The solution developed at COREDO includes comprehensive support at all stages, from document preparation to interaction with regulators and audit of the corporate structure.
- Tax optimization of investments
Usage of offshore and onshore structures, analysis of tax treaties, application of tools to reduce tax burdens when investing in funds.
AML/KYC and Compliance: What Is It?
International AML and KYC standards are a key element in protecting investor interests and preventing financial crimes.
- Regulatory bodies (ESMA, SEC, MAS) require the implementation of investor identification procedures, transaction monitoring, and regular audits.
- Due diligence in fund selection includes checking the corporate structure, source of funds, and the reputation of managers and custodians.
- COREDO’s practice has shown that implementing automated KYC/AML procedures reduces the risk of fund blocking and increases investor confidence.
Quick Due Diligence Checklist for Investors
| Review Stage | Description | Key Risks |
|---|---|---|
| Legal Structure | Review of corporate documents | Insufficient transparency |
| AML/KYC Procedures | Compliance with standards | Risk of fund blocking |
| Performance Evaluation | ROI, IRR analysis | Inflated figures |
| Fees and Expenses | Transparency of terms | Hidden payments |
| Liquidity | Exit conditions | Restrictions, penalties |
Fund management also implies an efficient corporate governance system and protection of investor rights.
Corporate Governance and Investor Rights
- Fund’s corporate structure: presence of an investment committee, custodian, sub-advisor, a transparent decision-making system.
- Fiduciary responsibility: managers are obliged to act in the interests of investors, ensuring transparency and accountability.
- Protection of minority investors’ rights: implementation of voting mechanisms, access to information, the ability to appeal decisions made by managers.
- Transparency of fees and expenses: open disclosure of all payments, absence of hidden fees – standard for leading international funds.
Investment Strategies and Risks
Forming an investment portfolio through funds is an art of balancing returns, liquidity, and risks. COREDO’s experience shows that optimal asset diversification and regular portfolio stress testing can reduce volatility and protect capital from market shocks.
- Investment portfolio: includes stocks, bonds, digital assets, real estate, alternative instruments (venture, hedge funds, crowdfunding platforms).
- Asset diversification: allocation of capital across different asset classes, regions, and strategies (value investing, growth investing).
- Private investor strategies: active management (personalized tool selection), passive management (investment in ETFs and index funds).
- Alternative investments: private equity, real estate fund, fund of funds, digital assets: tools for scaling a portfolio and reducing correlation with traditional markets.
- Risk management in investment funds: implementation of monitoring systems, portfolio stress testing, regular performance audits.
Fund Performance: ROI, IRR, Sharpe
Efficiency metrics are the basis for investor decision-making.
- ROI (Return on Investment), an indicator of overall return on invested funds.
- IRR (Internal Rate of Return), internal rate of return considering the time value of money.
- Sharpe ratio – the return-to-risk ratio allows comparing the performance of different funds.
- Asset valuation (NAV) – calculation of the current unit value reflects the actual liquidity of the fund.
- Comparing funds from Europe, Asia, Africa by these metrics can identify optimal strategies for scaling the investment portfolio.
Liquidity and the Secondary Fund Market
- Liquidity of investment funds depends on the type of fund: ETFs and open-ended funds provide quick exits, closed and venture: limited by terms and conditions.
- Secondary market for fund units: possibility of selling a unit to another investor, especially relevant for closed structures.
- Liquidity management: funds implement fund reservation mechanisms, capital withdrawal restrictions, early exit penalties.
- Legal risks for investors: it is important to study the exit conditions, possible restrictions and penalties stipulated in the investment memorandum.
Tools and Trends 2025
The investment fund market is actively introducing innovative solutions to enhance capital management efficiency and transparency for investors.
- Digital assets in the fund portfolio: cryptocurrencies, tokenized securities, digital bonds: tools for diversification and revenue enhancement.
- Management automation: use of artificial intelligence and algorithmic strategies for market analysis, portfolio optimization, and risk monitoring.
- Crowdfunding platforms: allow private investors to participate in venture financing, lowering the entry threshold.
- Sustainable development funds (ESG): integration of environmental and social criteria into the fund’s strategy: a trend confirmed by growing demand among institutional investors.
- Islamic investment funds (Shariah-compliant): compliance with Shariah principles, transparent structure, absence of speculative instruments.
Successful International Investment Funds: Examples
The COREDO team has implemented projects for the registration and support of investment funds in Luxembourg, Singapore, and UAE, providing clients with access to the best asset diversification strategies through funds.
How to Invest as a Private Investor?
How to choose an investment fund as a private investor in Europe, Asia, Africa?
The solution developed at COREDO is based on the following stages:
- Determine investment goals and acceptable risk level
Evaluate which type of fund suits your goals: long-term growth, diversification, business scaling.
- Conduct due diligence in selecting a fund
Study the corporate structure, investment memorandum, performance history, exit terms, and liquidity.
- Check the fund’s compliance with compliance and AML requirements
Ensure the fund has implemented international KYC/AML standards, works with reliable custodians and auditors.
- Evaluate the tax burden and optimization opportunities
Analyze the fund’s tax residency, double tax treaties, commission and expense structure.
- Protect your rights as an investor
Study corporate governance mechanisms, voting possibilities, access to reports, and conditions for minority investor protection.
Key Conclusions and Practical Advice
- Investment funds are an effective tool for private investors to diversify assets, scale capital, and reduce individual risks.
- Legal support for investments and a well-chosen jurisdiction are key to reducing tax burdens and protecting investors’ interests.
- Capital management requires regular monitoring of fund efficiency through ROI, IRR, Sharpe ratio metrics, analysis of corporate structure, and transparency of commissions.
- Compliance, AML, and due diligence are mandatory steps for entering international markets and attracting institutional investors.
What to Check Before Investing
- Fund type and its corporate structure
- Minimum entry threshold and investor requirements
- Capital management strategy, asset diversification
- Efficiency metrics (ROI, IRR, Sharpe ratio)
- Liquidity terms and fund exit conditions
- Transparency of fees and expenses
- AML/KYC and compliance adherence
- Protection of minority investors’ rights
Common Questions from Entrepreneurs and Investors
Registering a fund requires choosing a jurisdiction with an optimal tax regime, adhering to international AML/KYC standards, and preparing a transparent corporate structure. The EU and Asia have different requirements for reporting and investor protection, affecting tax burdens and accessibility for private investors.
ETFs and open-ended funds are available with minimum investments from $1,000, while closed and venture funds start from $100,000. The higher the threshold, the more requirements for due diligence and transparency.
ESMA, SEC, and MAS require regular reporting, fee structure disclosure, implementation of AML/KYC procedures, and investor rights protection.
Underestimating compliance requirements, lack of due diligence, choosing jurisdictions without considering tax implications, non-transparent fee structures.
The right choice of fund ensures stable capital growth, reduced tax burdens, access to innovative tools, and protection of investor rights.
COREDO’s expertise in legal entity registration, obtaining financial licenses, AML consulting, and comprehensive business support is confirmed by dozens of implemented projects in the EU, Asia, and the CIS. If you want to structure your investment portfolio, reduce risks, and ensure investment transparency: the COREDO team is ready to become your reliable partner at all stages of working with international investment funds.