MUTUAL INVESTMENT FUND. WHAT IS A MUTUAL INVESTMENT FUND? TAX-EFFICIENT FINANCING OF CONSTRUCTION BUSINESS IN UKRAINE
Mutual investment fund in a financing structure: earlier review
The source article explained a mutual investment fund in simplified form as an investment mechanism with a special accounting regime, its own name and a management company. The material described the use of collective investment institutions and asset-management companies to finance high-return projects, primarily in construction.
The author's logic was that an investment structure could accumulate funds, hold corporate rights, real estate or land assets and redistribute the investment result between the issuer, asset-management company and investor. Foreign investors and holding companies were considered separately.
Financing through securities
The earlier text drew attention to bond models that allowed flexible provision of working capital to an enterprise and distribution of income between participants in the structure. The investment result of a foreign holding company was expected to be taxed under the rules of its jurisdiction of registration.
It also stated that an asset-management company within the group could manage different assets and accumulate income until it was paid to the investor. This concept was presented as an alternative to artificially increasing the price of goods and services, which did not correspond to the legal model of genuine investment activity.
Application note
The article is historical and reflects the approaches and terminology of the period when it was published. It does not contain a ready-made structure for a modern project. The legal regime of collective investment institutions, taxation, securities issues, currency operations and payments to non-residents must be assessed separately for each structure and as at the date it is created.
Work starts with analysis of the source of funds, investor composition, assets, expected income flows, powers of the asset-management company and the economic purpose of the operations. Only after that can it be determined whether a mutual investment fund meets the needs of the specific investment or construction project.
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