Nikita Veremeev
10.09.2025 | 6 min read
Updated: 10.09.2025
Indirect investments are capital investments through investment funds, financial brokers, trust management, or other intermediary structures, where the investor does not gain direct control over the investment object. This approach is widely used for portfolio diversification, risk reduction, and quick access to various markets, especially in conditions of high volatility.
Indirect Investments and the Role of Intermediaries
The practice of COREDO shows that international companies use the following indirect investment tools:
- Investment funds (including ETFs, hedge funds, venture funds) – allow investing in a wide range of assets with minimal involvement in operational management.
- Financial brokers and investment advisors: provide access to foreign markets, selection of investment instruments, and transaction support.
- Trust asset management, transferring portfolio management to professional managers to achieve specified investment goals.
- Digital investment platforms – portfolio management automation, risk monitoring, and rapid diversification.
The COREDO team has implemented projects for structuring portfolio investments for clients from the EU and Asia using international funds and brokerage platforms with a high degree of investor rights protection and a transparent compliance control system.
Risks of Indirect Investments
Indirect investments, despite attractive liquidity and diversification, are associated with several specific risks:
- Compliance and AML risks, the need for thorough verification of investment intermediaries’ compliance with AML procedures and KYC standards, especially when working with funds in the EU and Asia.
- Limited investment control: lack of direct influence on the strategy and operational activities of investment objects.
- Market and intermediary risks, dependence on the competence of managers, transparency of fund structures, and reliability of brokers.
- Legal risks in different jurisdictions: differences in regulation, information disclosure, and investor rights protection.
COREDO’s experience shows that minimizing these risks is possible only through comprehensive Due Diligence of intermediaries, transaction monitoring automation, and the implementation of international compliance standards.
Direct and Indirect Investments – Differences
The choice between direct and indirect investments determines not only the ownership structure but also the risk management strategy, return on investment, and long-term implications for the corporate structure.
Direct and Indirect Investments: Comparison
| Criteria | Direct Investments | Indirect Investments |
|---|---|---|
| Control | High (direct ownership, managerial involvement) | Low/absent (through intermediaries, funds) |
| Risks | Legal, strategic, operational | Compliance, intermediary, market |
| ROI | Potentially higher, depends on management | Stable, diversified |
| AML/KYC | Required during registration and support | Required when working with funds and brokers |
| Legal Documentation | Company registration, contracts, M&A, JV | Contracts with funds, brokers, trust management |
| Liquidity | Limited, depends on structure | High, quick sale of shares/stocks |
| Strategic Role | Scaling, control, long-term goals | Diversification, risk reduction |
COREDO’s practice confirms: for strategic investments in international business requiring control and scaling, direct asset ownership and the creation of subsidiaries remain the optimal choice. For diversification purposes and quick market entry: indirect investments through funds and brokers.
Legal Risks of International Investments
International investments require not only a competent choice of structure but also strict adherence to legal and compliance requirements. Violating these standards can lead to asset blocking, fines, and reputation loss.
In this regard, special attention should be paid to the regional peculiarities of investment regulation in different jurisdictions.
Investment Regulation in the EU, Asia, and Africa
Regulatory requirements for foreign investments vary significantly:
- EU: Strict requirements for information disclosure, ownership structure transparency, and compliance with AML/KYC standards. Company registration for investment activities requires comprehensive due diligence and compliance with foreign participation quotas.
- Asia: In several countries (e.g., Singapore, Cyprus), flexible regimes exist for foreign investors, but increased attention is paid to compliance and financial transaction monitoring.
- Africa: Direct investments require company registration, adherence to local investment restrictions, and participation in investor rights protection programs.
The COREDO team supports M&A transactions, company registration, and joint venture structuring in these regions, ensuring compliance with international investment agreements and ESG factors.
AML, KYC and Due Diligence for Investors
- AML procedures (anti-money laundering legislation) and KYC (know your customer) are mandatory during the registration of companies, opening accounts, and concluding investment agreements.
- Due diligence: comprehensive verification of investment objects, intermediaries, and sources of funds.
- Compliance control: automation of transaction monitoring, implementation of international reporting standards (IFRS), ensuring ownership structure transparency.
Solutions developed by COREDO allow integrating these procedures into the corporate structure, minimizing risks and accelerating the process of entering new markets.
Thus, comprehensive implementation of AML, KYC, due diligence, and compliance control creates a reliable foundation for an effective and secure investment process. Next, let’s consider how to choose the type of investment.
How to Choose the Type of Investment
Choosing between direct and indirect investments should be based on the business’s strategic goals, the desired level of control, acceptable risks, and liquidity requirements.
Direct or Indirect Investments: What to Choose
- Strategic investments and scaling: direct involvement, creation of subsidiaries, controlling stake.
- Portfolio diversification and risk reduction, portfolio investments through funds, trust asset management.
- Long-term implications for corporate structure: analysis of tax burden, ownership transparency, and international tax planning opportunities.
- Corporate risk management: implementation of compliance procedures, monitoring automation, assessment of investment attractiveness of the jurisdiction.
Examples of Successful International Investments
In one of the cases, COREDO assisted a European company in entering the Southeast Asian market by creating a subsidiary in Singapore. Through comprehensive legal support, the implementation of international compliance standards, and portfolio automation, the client not only minimized legal risks but also ensured a high level of ROI due to direct control over the business.
In another project, the COREDO team structured portfolio investments for a corporate client from the EU through international funds and digital platforms, achieving maximum diversification and reducing portfolio volatility.
Main Recommendations for Entrepreneurs
- Minimize legal and compliance risks: integrate due diligence, AML/KYC, and compliance control at all stages of the investment process.
- Prepare a full set of documents for company registration and account opening in selected jurisdictions, considering local information disclosure requirements.
- Choose intermediaries with impeccable reputations and transparent ownership structures, using international ratings and recommendations.
- Ensure ownership structure transparency, use international reporting standards, automate monitoring, and use digital platforms for portfolio management.
- Optimize corporate governance – implement modern control tools, strategic alliances, and mechanisms for protecting investor rights.
Popular Questions for Entrepreneurs
What is the strategic difference between direct and indirect investments for international business? Direct investments provide control and strategic management, while indirect investments offer diversification and liquidity.
Which type of investment provides greater control over the investment object? Maximum control is achieved through direct asset ownership, creation of subsidiaries, and management involvement.
What legal and compliance risks arise with indirect investments in the EU or Asia? The main risks are associated with insufficient transparency of intermediaries, AML/KYC violations, and difficulties in protecting investor rights.
How does the investment structure affect ROI? A direct structure allows influence over operational efficiency and increases ROI, while an indirect structure reduces volatility but limits growth potential.
How to ensure AML/KYC compliance in international investments? Integrate verification procedures at the due diligence stage, automate financial monitoring and use international compliance standards.
What information disclosure requirements are imposed on investors in the EU and Asia? In the EU, there are strict transparency and reporting standards, while in Asia, requirements vary by country, but overall control over sources of funds and ownership structure is being strengthened.
If you plan to scale your business, create an effective investment portfolio, or enter new international markets – the COREDO team is ready to become your strategic partner, providing legal, financial, and compliance support at every stage of the investment cycle.