Cryptocurrency Investment Fund in Lithuania
An Alternative Investment Fund (AIF) is a legal entity established for the purpose of raising capital from a number of different investors with an aim to invest these funds into unconventional tangible and intangible assets to generate favourable returns. Examples of such assets include cryptocurrency and other hedge funds, real estate funds, wine as well as fine art and antiques. The results 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 piece of legislation defining activities of all EU-based fund managers.
The marketing of assets of an AIF managed by an AIFMD-licensed management company to professional and/or retail investors may be started only after the AIF has obtained an authorisation from the Bank of Lithuania to market assets of the relevant AIF to professional and/or retail investors in Lithuania.
When launching a crypto-asset fund, regulatory compliance, fund structure, jurisdiction and documentation are of paramount importance. Our dedicated and highly experienced team of Company in Lithuania can provide expert guidance in establishing a new cryptocurrency investment fund in Lithuania.
Formation of a Cryptocurrency Investment 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:
- Carefully defining 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 covered 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 authorisations from the Lithuanian regulatory institutions.
- Drafting and negotiating any required legal documentation for the fund.
Company in Lithuania UAB offers legal support in setting up cryptocurrency investment funds so that you start out with confidence and a clear outlook.
An alternative investment company intending to operate under the local law may have the following legal forms:
- A public limited company (AB)
- A private limited company (UAB)
- A general partnership (TUB)
- Limited partnership (KUB)
Possibilities and Risks of an Alternative Investment Fund
In essence, an alternative asset can be anything that’s sold or bought outside the traditional stock, bond, and commodity markets, and this includes cryptocurrencies. There are a few reasons why alternative investments continue to grow in popularity, not only among high-net-worth investors, but also between retail investors.
Alternative asset funds attract investors’ attention due to the high probability of high risk-adjusted returns compared to the traditional investments, although the rate of return for alternative assets is not guaranteed. Alternative assets tend to appeal to long-term investors who expect to gain significant returns over the long term, instead of craving for immediate profits from more volatile stock markets. That said, it’s worth noting that although cryptocurrencies are considered to be alternative assets, they’re highly volatile and therefore should be invested in after careful research.
Another key benefit 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 assets fund can include two different categories of assets:
- Return enhancers, which are the assets added to a portfolio with the expectation of a higher average return.
- Return diversifiers, which are the assets added to a portfolio because of their minimal connection to other assets, with the aim of mitigating risk across the entire portfolio.
However, depending on an industry of assets, alternative investment funds have their own unique risks and challenges. In addition to volatility, transparency might be an issue to the investors. While stocks are strictly government-regulated and are overseen by the exchanges they’re listed on, such alternative asset markets as collectables, wine, fine art and cryptocurrencies operate with relatively little regulation, which causes a lack of transparency.
The bottom line is that 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.
Benefits of an Alternative Investment Fund
For the founders:
- The business model includes a considerable fee paid by the investors to the fund manager for managing the investment fund.
- The European alternative investments marketplace is relatively easy to enter.
- A new investment fund can be launched within 2 months (or longer, depending on the complexity of the project).
For the investors:
- Vast investment opportunities with high returns, including cryptocurrencies.
- Diversification reduces the amount of risk posed when seeking to maximise returns.
Assistance in Creating a Cryptocurrency Fund
Before starting to work on your alternative investment fund, the specialists of Company in Lithuania UAB recommend consulting with qualified and experienced lawyers from our local team who will draw up a detailed legal opinion document for your planned project. It consists of the analysis of your business model and its compliance with the Alternative Investment Fund Managers Directive (AIFMD) and local regulations.
Our experienced team is happy to assist you in ensuring compliance with all relevant regulations when launching a cryptocurrency investment fund in Lithuania. We’ll take care of the preparation of all the required documents and will help to implement the requirements of the Bank of Lithuania, which will lead to obtaining an alternative investment fund licence.
We take pride in being a highly cooperative team and in applying an individualised approach when guiding our clients through the legal and accountancy processes in Lithuania. It allows us to overcome business challenges of various complexities and to empower any entrepreneur who we have the pleasure to deal with. You shall be assured that the launch of your fund will meet the latest requirements, as we closely monitor the changes of Lithuanian legislation and practice.