Alternative Investments Fund (AIF) in Lithuania

Investment funds offer an attractive strategy for “putting money to work”, especially to those who are looking to diversify their investment portfolio to maximize gains and reduce investment risks. They are also gaining popularity as means for long-term investment, which means that the demand for reliable and well-managed investment funds grows at a steady pace. Lithuania offers good conditions for establishing different types of investment funds, but taking a final decision still requires careful consideration and full awareness of regulatory requirements.

ESTABLISHING AN ALTERNATIVE INVESTMENT FUND

An Alternative Investment Fund (AIF) is a legal entity established for the purpose of raising capital from a number of different investors. These funds are then used for investment in unconventional tangible and intangible assets, which are expected to generate favorable returns. Examples of such assets include cryptocurrency and other hedge funds, real estate funds, wine, fine art and antiques. The success of such funds are dependent on the fund manager’s skills, fund strategy, investment assets, and market situation. Alternative investment funds are regulated by the Alternative Investment Fund Managers Directive (AIFMD) which is the key legislative body for activities of all EU-based fund managers.

To market AIF assets to professional and/or retail investors, an AIFMD-licensed management company that manages those assets has to obtain an authorisation from the Bank of Lithuania. Moreover, the formation and administration processes of a fund have to adhere to a set of regulations specified by AIFMD. Those include, but are not limited to, regulatory compliance norms, fund structure requirements, jurisdiction and documentation guidelines.

An alternative investment company intending to operate under the local law may take one of the following legal forms:

ESTABLISHING A CRYPTO ASSET FUND

Funds investing in crypto-assets are classified as Alternative Investment Funds (AIFs) and they’re managed by Alternative Investment Fund Managers (AIFMs). In fact, such funds can only be established and managed by professional investment fund managers, i.e. a management company whose main activity is the management of investment fund assets and which is licensed by the Bank of Lithuania to engage in such activities.

Before launching a cryptocurrency investment fund, managers should consider a number of stages and factors pertaining to the process. Here’s an outline of the key stages:

• Defining a strategy and writing up an offering memorandum.
• Raising the initial capital and premarketing with key investors to determine interest in the fund (premarketing conditions are specified by the Bank of Lithuania).
• Deciding on the most suitable business structure in Lithuania.
• Continuing your marketing activities to attract more investors.
• Laying out a credible investment proposition through the design of a robust infrastructure, compliance and risk management function.
• Applying for authorisation from the necessary Lithuanian regulatory institutions.
•  Drafting and negotiating any required legal documentation for the fund.

ESTABLISHING A MONEY MARKET FUND

Similarly to crypto asset funds, money market funds established in Lithuania are also licensed by the Bank of Lithuania. They invest in highly liquid instruments such as cash, cash equivalents, and high-rated debt-based securities. Money market funds provide essential short-term loans to corporate entities and government-owned enterprises, which is why the EU is actively working to ensure equal operating rights and protect investors in all member states.

A money market fund intending to operate under the local law in Lithuania may take one of the following legal forms:

• A public limited company (AB)
• A private limited company (UAB)

KEY BENEFITS OF INVESTMENT FUNDS

Alternative investment funds (including crypto asset funds)

One of the key benefits of alternative investment funds is the opportunity to diversify an investment portfolio away from traditional investments, which then reduces overall portfolio risk. These sorts of portfolios might be so diverse that their overall returns are not correlated to the stock market or the bond market. In other words, this can offer stability to an asset portfolio and reduce volatility where possible. Due to the diversification, many alternative assets, including cryptocurrencies, can also protect your investment against inflation.

Alternative investment funds provide convenient investment opportunities to those who aren’t too keen to become experts of fine art, cryptocurrencies, watches or wine but are looking for varied ways to put their money to work. While investors should do their homework before deciding to invest in a particular alternative investment fund, investment fund managers are expected to strive to ensure that risks are calculated accurately and managed carefully.

To be successful in Lithuania, these managers have to familiarise themselves with local operational peculiarities as well as an array of regulatory requirements. Company in Lithuania UAB team will gladly share their expertise in this matter.

Money Market Funds

Similarly to alternative investment fund managers, managers of money market funds are professionals who have their best interest in finding the best ways to invest and bring significant gains to investors. Furthermore, money market funds are one of the least volatile types of mutual fund investments. Unlike alternative investment funds, they bring short-term gains that can be collected on short notice. That way, investments are less vulnerable to market fluctuations and are lower in risk than, for example, crypto-related investments.

Competent and dedicated experts at Company in Lithuania UAB are ready to share their valuable insights, provide legal support and offer guidance in establishing and managing an investment fund. Contact us and get a quote to launch an Alternative Investment Fund (AIF) in Lithuania in the shortest time possible.