Collective Investment Vehicles Research Articles

The European Call for More Shareholders’ Engagement: State of Play and Way Forward

Building up on recent European works, ie, the green paper on corporate governance in financial institutions, the green paper of the European Commission on the European corporate governance framework and the report of the reflection group on the future of European company law, this article first suggests that more and more voices are favoring shareholders value maximization with a long-term view as corporate objective. It however slightly qualifies the (global and European) plea for corporate engagement by (primarily) institutional investors. It goes on to summaries some suggestions already made by European bodies for the promotion of long-term commitment by institutional investors and draws the attention to remaining concerns. Lastly, it recommends drafting a European stewardship code for institutional investors, and especially pension funds, insurance companies and other collective investment vehicles. That code should be complemented by a regulation which should require compliance with the code.

The Implications of Treaty Application for a Netherlands Closed Fund for Mutual Account

This article examines how the Netherlands has implemented the suggestions in the Commentary on Article 1 of the OECD Model (2010) regarding collective investment vehicles in respect of the Netherlands closed fund for mutual account in its tax treaties and competent authority agreements.

The Implications of Treaty Application for a Netherlands Closed Fund for Mutual Account

This article examines how the Netherlands has implemented the suggestions in the Commentary on Article 1 of the OECD Model (2010) regarding collective investment vehicles in respect of the Netherlands closed fund for mutual account in its tax treaties and competent authority agreements.

The Liechtenstein 2011 UCITS Law Opens New Opportunities for Collective Investment Vehicles

The Liechtenstein UCITS Law of 28 June 2011 implements the UCITS IV Directive, overhauls the country’s UCITS regime, and introduces reforms aimed at making the jurisdiction more attractive to investment funds. The resulting legislation creates a flexible legal environment for funds that is fully harmonized with the UCITS IV Directive.

Fiscal State Aid and Real Estate

State aid is an issue that does not immediately come to mind on the topic of real estate collective investment vehicles (CIVs). Nevertheless the question of state aid plays an important role. Last year, the European Commission charged with the monitoring of state aid has taken an important decision on this matter. The Finland government had asked the European Commission for a judgment on a fiscal regime for Real Estate Investment Trusts (REITs) to be implemented by Finland. In this paper, I will focus on this decision and the effect it may have on the Dutch fiscal regimes for real estate CIVs. In paragraph 1, I will describe the rationale for fiscal regimes of CIVs: fiscal neutrality. Then in paragraph 2, I will make some basic remarks on state aid. Paragraph 3 contains an outline of the Dutch fiscal regimes for real estate CIVs. In paragraph 4, these Dutch fiscal regimes for real estate CIVs are examined in the light of state aid. The decision of the European Commission with respect to Finnish REITs is discussed in paragraph 5. I end in paragraph 6 with the significance of this decision for the Dutch fiscal regimes for real estate CIVs as well as with a conclusion.

Suggested Treaty Benefits Approaches for Collective Investment Vehicles (CIVs) and Its Investors under the OECD MTC 2010 update

Collective investment vehicles (CIVs) are specifically addressed in the 2010 update of the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention (MTC) and the commentary thereto. Attention is paid to the tax treaty position of CIVs in an international context. The main question is whether a CIV is treaty-eligible and, if not, whether the investors in the CIV are allowed to claim some kind of treaty protection in lieu of the CIV. In this paper, the author addresses the specific approaches laid down in the 2010 commentary to the OECD MTC to cope with the problems that arise if the normal rules are applied to CIVs.

Granting Tax Treaty Benefits to Collective Investment Vehicles: A Review of the OECD Report and the 2010 Amendments to the Model Tax Convention

One of the significant amendments to the 2010 Model Tax Convention is the introduction of new paragraphs to Article 1 of the Commentary regarding the granting of tax treaty benefits to Collective Investment Vehicles (CIVs). Those amendments are the result of the work performed by the Organisation for Economic Co-operation and Development (OECD) in the past years, which gave rise to a report, published in April 2010. This article describes the contents of this report and the corresponding amendments to the Commentary and, where relevant, makes some critical remarks to the solutions provided therein.

Study on Offshore Tax Evasion through Collective Investment Vehicles (CIV)

Study on Offshore Tax Evasion through Collective Investment Vehicles (CIV)

Taxation of Collective Investment Funds and Availability of Treaty Benefits

In this article, the authors outline the advantages of Ireland as an international fund domicile of choice, highlighting the special tax regimes applicable to various types of collective investment vehicles in a domestic context as well as the tax treaty entitlement of such funds.

OECD Report on the Granting of Treaty Benefits with respect to the Income of Collective Investment Vehicles

This article considers the report of the OECD Committee on Fiscal Affairs, released on 31 May 2010, on “The Granting of Treaty Benefits with respect to the Income of Collective Investment Vehicles”. In addition to providing background information on collective investment vehicles, the author addresses the application to collective investment vehicles of current treaty rules and possible alternatives under the Report.

Investing in Hedge Funds: Risks, Returns and Performance Measurement

Hedge funds are collective investment vehicles that are often established with a special legal status that allows their investment managers a free hand to use derivatives, short sell, and exploit leverage to raise returns and cushion risk. We review various issues relating to the investment in hedge funds, which have become popular with high net-worth individuals and institutional investors, as well as discuss their empirical risk and return profiles. The concerns regarding the empirical measurements are highlighted, and meaningful analytical methods are proposed to provide greater risk transparency in performance reporting. We also discuss the development of the hedge fund industry in Asia.

Investing in Hedge Funds: Risks, Returns and Pitfalls

Hedge funds are collective investment vehicles fast becoming popular with high net worth individuals as well as institutional investors. These are funds that are often established with a special legal status that allows their investment managers a free hand to use derivatives, short sell, and exploit leverage to raise returns and cushion risk. Given that that they have substantial latitude to invest, it is instructive to examine the performance of hedge funds compared to other forms of managed funds. This paper provides an overview of hedge funds and discusses their empirical risk and return profiles. It also poses some concerns regarding the empirical measurements. Given the complexity of hedge fund investments, meaningful analytical methods are required to provide greater risk transparency and performance reporting. Hedge fund performance is also beset by a number of issues generating practical risks. These risks are not fully addressed by the usual risk-adjusted performance measures in the literature. A penalty function to discount these extraneous risk dimensions is proposed. The paper concludes that further empirical work is required to provide informative statistics about the risk and return of hedge funds.

Polish Corporate Income Tax Treatment of Collective Investment Vehicles from a Domestic Law and Tax Treaty Perspective

This article examines Polish taxation principles applicable to collective investment vehicles pursuing business activities in Poland, with particular emphasis on existing tax controversies and potential disputes with the Polish tax authorities. The author discusses domestic, EU and international tax law implications associated with investments carried out through a collective investment scheme.

Changes to the OECD Commentary on Collective Investment Vehicles Proposed by the OECD Committee on Fiscal Affairs

The author reviews, in this article, the changes to the OECD Commentary on Collective Investment Vehicles that have recently been proposed by the OECD Committee on Fiscal Affairs, together with the potential tax treaty and EU law implications of the changes.

Collective Investment Vehicles in International Tax Law: The Swiss Perspective

With the Collective Investment Act Switzerland has introduced new types of investment funds, that is, the Société d’investissement à capital variable (SICAV), the limited partnership for collective investments (PSCI) and the Société d’investissement à capital fixe (SICAF). The Swiss Federal Tax Administration has introduced the tax regulations for a taxation of the funds and their investors at the beginning of the year. This article covers first the amended principles of taxation of funds in Switzerland and the existing uncertainties. It focuses on the international aspects like the entitlement of the funds for treaty benefits, the reimbursement by foreign investors of the Swiss withholding tax levied on distributions by the funds and the qualification of foreign funds for Swiss tax purposes.

Collective investment vehicles

Collective investment vehicles are used to take advantage of economies of scale, cost reduction and many (operational) efficiency gains, including decreasing administrative and monitoring burdens. This article focuses on cross-border collective investment vehicle structures implemented through the Netherlands, and, where appropriate, considers specific aspects in relation to derivative instruments.

Hedge Fund Activism and Corporate Governance: The State of the Art

Hedge Funds have become a buzzword in the financial world. A litany of authors have produced thoughts about these collective investment vehicles. Their ideas have led to strong debates about the role and function of hedge funds in financial markets globally. This article provides a brief but cogent overview of the state of the art literature regarding hedge fund activism in publicly traded companies. The purpose of the article is to shed light on the notion of hedge fund activism and to put the issue in a forward-looking perspective.

AN EVALUATION OF HEDGE FUNDS: RISK, RETURN AND PITFALLS

Hedge funds are collective investment vehicles fast becoming popular with high net worth individuals as well as institutional investors. These are funds that are often established with a special legal status that allows their investment managers a free hand to use derivatives, short sell and exploit leverage to raise returns and cushion risk. Given that they have substantial latitude to invest, it is instructive to examine the performance of hedge funds as compared to other forms of managed funds. This paper provides an overview of hedge funds and discusses their empirical risk and return profiles. It also poses some concerns regarding the empirical measurements. Given the complexity of hedge fund investments, meaningful analytical methods are required to provide greater risk transparency and performance reporting. Hedge fund performance is also beset by a number of practical issues generating "practical risks". These risks are not fully addressed by the usual risk-adjusted performance measures in the literature. A penalty function to discount these extraneous risk dimensions is proposed. The paper concludes that further empirical work is required to provide informative statistics about the risk and return of hedge funds.

The Evolution Trajectories of Voucher Funds: Towards Western-type Institutional Investors? The Case of the Czech Republic and Bulgaria

The implementation of similar mass privatization programs in the Czech Republic and Bulgaria led to the emergence of hybrid voucher funds. The contradictions stemming from this hybrid nature gave rise to the evolution of the funds' nature and of their place in the national ownership structure. The dynamics of this evolution is apprehended through a comparative study of the portfolios of a sample of funds between 1998 and 2000. We show how the interaction between the strategies of economic actors have shaped two transformation paths of the initial funds: holding companies on one hand and more ordinary collective investment vehicles on the other, the Czech and Bulgarian evolutions being divergent. We also discuss to what a degree these mutations bring these funds closer to Western-type institutional investors, showing that there is some convergence, but also the emergence of original forms.

The Future as History: The Prospects for Global Convergence in Corporate Governance and Its Implications

Comparative research has shown that, even at the level of the largest firms, corporate ownership structure tends to be highly concentrated, with dispersed ownership structures characterizing only the Anglo/American context. What explains these national boundaries between dispersed and concentrated ownership structures? Earlier in this decade, several authors (most notably, Mark Roe) proposed theories of corporate finance under which dispersed ownership was viewed as largely the result (in the U.S.) of regulatory constraints imposed on the development of financial intermediaries. Under this view, a deep-rooted American political ideology disfavored concentrated financial power, with the alleged result that the Berle/Means model of the firm (with its characteristic separation of ownership and control) became dominant in the U.S. (but not elsewhere). More recently, economists working on the privatization of transitional economies have focused on the difficulties in establishing viable securities markets. Based on survey data, they have concluded that common law regimes vastly outperform civil law regimes in fostering the development of equity markets. Even if this research is still at a preliminary stage, this data suggests an alternative hypothesis for the observed dichotomy between concentrated and dispersed ownership: namely, only those legal systems that provide significant protections for minority shareholders can sustain active equity markets. This hypothesis is the mirror image of the earlier noted theory of corporate finance: under the hypothesis, dispersed ownership evidences not the overregulation of institutional investors, but the law?s success in encouraging investors to accept the status of minority owners. Similarly, financial intermediaries fail to grow to the scale observed in Japan and Germany, because individuals do not need to rely upon them as collective investment vehicles. These two contrasting theories yield very different predictions about the likelihood that globalization will produce significant convergence in corporate governance. Emphasizing the inertial impact of path dependency, proponents of the former political theory have focused on the barriers to formal convergence and been skeptical of the prospects for legislative change. Proponents of the hypothesis have yet advanced no logical corollary to their arguments, but this article examines an alternative and more likely route to significance convergence in corporate governance: namely, functional convergence attained, first, through the migration of foreign issuers to the U.S. securities markets and, second, through international harmonization of securities regulation and disclosure standards. Empirically, the migration of foreign issuers to the U.S. markets has accelerated in this decade, and this article examines several hypotheses for this trend, including (i) the possibility that a U.S. listing is a bonding mechanism by which issuers assure minority shareholders that they will not be exploited; (2) the existence of network externalities associated with securities exchange that attract issuers even in the face of high regulatory costs; and (3) the possibility that the strong position of management in the Berle/Means corporate structure protects minority shareholders from the danger that the subsequent formation of a control block will permit a new controlling shareholder to expropriate value from them. Finally, this article argues that convergence in corporate governance will occur not at the level of corporate laws, but at the level of securities regulation. In particular, it emphasizes the critical, but often overlooked, role for securities regulation in reducing agency costs. In this regard, developments in the United States may foreshadow future international corporate convergence, as, it is argued, the predominance of federal securities law has largely overshadowed variations in state corporate laws and rendered unimportant the competition among American states for corporate charters. Similarly, on the international level, securities harmonization may trivialize path dependent variations in national law.