Alternative investment fund

What it means

An alternative investment fund is any fund that is not a standard mutual fund under the European UCITS rules. It invests in assets not normally traded on an exchange, such as property, private companies, loans, energy or commodities.

It is run by an alternative investment fund manager who needs authorisation or registration with the National Bank of Slovakia. The fund may take the form of a unit trust, a joint-stock company with variable capital or a limited partnership.

Private equity and venture capital funds belong here too. They are mostly aimed at qualified investors, with higher minimum investments and longer horizons.

How it works in practice

For businesses, alternative funds are a source of capital for growth, acquisitions or succession. The fund takes a stake or lends money and expects a return when it sells after several years.

For investors, including companies with spare cash, alternative funds offer diversification beyond shares and bonds. The investment is shown in the accounts as a financial asset, and a sale gives rise to taxable income.

Fund managers must publish sustainability information under SFDR and follow investor protection rules when distributing, similar to MiFID II.

What to watch out for

Alternative funds are less liquid: money often cannot be withdrawn at any time, and asset values are estimated rather than set by market prices. Redemption terms and fees should be understood before investing.

Beware of offers from „funds“ that have no authorisation or registration. The National Bank of Slovakia publishes the list of licensed managers, and checking takes a few minutes.