Investment opportunities of closed-end UIFs to be expanded
The units of closed-end unit investment funds (UIFs) for qualified investors can now be divided into classes, the maximum life cycle of closed-end UIFs will be extended, and funds will be able to change their status from ‘a closed-end UIF for qualified investors’ to ‘a closed-end UIF for non-qualified investors’. Such innovations are provided for by the draft law adopted by the State Duma in the first reading.
The draft law makes the management of such funds more flexible. Investors will thus exercise their rights combining various forms and types. The trust management rules may allow the issue of units of several classes with different combinations of unit holders’ rights. For example, such units may grant more voting rights at the general meeting of unit holders whereas their current income will be smaller or equal zero, which will be suitable for anchor investors. Non-voting units, in turn, may involve additional rights to obtain regular income and investors may redeem them early if they do not agree with the decisions of the general meeting.
The maximum life cycle of closed-end UIFs for qualified investors will be extended from 15 to 49 years. Such funds often implement large-scale and long-term investment projects. Thus, it will be possible to synchronise the project implementation timeframes with the closed-end UIF’s life cycle.
In addition, the document grants the right to reclassify a fund. As a result, qualified anchor investors will be able to withdraw from a project after the completion of its risky stage (for example, after the commissioning of a constructed shopping mall), while such a fund will be accessible for non-qualified investors who will obtain regular income from the lease of the constructed facility.
Currently, an increasing number of qualified investors choose closed-end UIFs. Such an instrument enables them to better structure the assets for doing business and participate in the day-to-day management of the assets keeping the ownership confidential and ensuring professional trust management.