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DIFC Open-ended and Closed-ended Investment Funds
This episode is also available as a blog post: https://10leaves.ae/publications/difc/difc-open-ended-and-closed-ended-investment-funds
DIFC OEIC and DIFC CEIC vehicles:
Funds that are structured as companies, have two main options in the DIFC.
Open-ended Investment Company (OEIC)
Closed-ended Investment Company (CEIC)
There are many considerations that go into choosing a legal structure for a fund. Some of them being – the jurisdiction of choice, the fee structure, tax considerations and the like. The choice between open-ended and closed-ended vehicles for DIFC investment funds however, depends a lot on the investment objective and fund strategy.
The basic difference between an open-ended and a close-ended fund is the option of liquidity, i.e. whether investors (or unit holders) are allowed redemptions. Open-ended funds allow periodic redemptions on certain days, depending on how frequently the Net Asset Value (NAV) of the fund is calculated. For heavily traded funds, this can be daily as well. Most private funds however, have longer NAV periods, ranging from monthly, to quarterly. Closed-ended DIFC funds however, have no such provisions. They are essentially illiquid, due to the nature of the underlying investments. Such funds are usually property or venture capital funds, that require a longer commitment to the underlining investment objectives. These funds have to be closed-ended, since it would not be practical to fulfill periodic redemption requests by selling off the underlying assets. Some closed-ended funds do have an exit option – solely at the discretion of the directors, and at a steep exit fee.
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By 10 LeavesThis episode is also available as a blog post: https://10leaves.ae/publications/difc/difc-open-ended-and-closed-ended-investment-funds
DIFC OEIC and DIFC CEIC vehicles:
Funds that are structured as companies, have two main options in the DIFC.
Open-ended Investment Company (OEIC)
Closed-ended Investment Company (CEIC)
There are many considerations that go into choosing a legal structure for a fund. Some of them being – the jurisdiction of choice, the fee structure, tax considerations and the like. The choice between open-ended and closed-ended vehicles for DIFC investment funds however, depends a lot on the investment objective and fund strategy.
The basic difference between an open-ended and a close-ended fund is the option of liquidity, i.e. whether investors (or unit holders) are allowed redemptions. Open-ended funds allow periodic redemptions on certain days, depending on how frequently the Net Asset Value (NAV) of the fund is calculated. For heavily traded funds, this can be daily as well. Most private funds however, have longer NAV periods, ranging from monthly, to quarterly. Closed-ended DIFC funds however, have no such provisions. They are essentially illiquid, due to the nature of the underlying investments. Such funds are usually property or venture capital funds, that require a longer commitment to the underlining investment objectives. These funds have to be closed-ended, since it would not be practical to fulfill periodic redemption requests by selling off the underlying assets. Some closed-ended funds do have an exit option – solely at the discretion of the directors, and at a steep exit fee.