On March 1 1998, an amendment of the Austrian Investment Fund Act (Investmentfondsgesetz) entered into force. New types of investment funds and provisions dealing with fund management and marketing activities were introduced.
Special funds (Spezialfonds)
Special funds are open to a maximum of 10 corporate investors. Natural persons are excluded as shareholders in special funds. The transfer of shares in special funds is restricted, requiring approval by the underlying capital investment company. Provisions of the Investment Fund Act dealing with the protection of private investors do not apply to special funds. This leads to some simplifications, such as streamlined licensing procedures, easier changing of fund provisions and facilitation of registration requirements. It should be noted that special funds are not UCITS under EU Directive 85/611.
Holding funds (Dachfonds)
Holding funds are permitted to hold up to 100% of their assets in other investment funds or open-end investment corporations. However, only shares in investment funds or open-end investment corporations complying with EU Directive 85/611 may be purchased. A holding fund is not allowed to hold more than 50% of its assets in any one investment fund or open-end investment company. Again, holding funds do not comply with EU Directive 85/611.
Accumulative funds (Thesaurierende Fonds)
The amendment gives an investment fund the opportunity either to retain or distribute all profits. Partial distribution of profits is still not permitted. However, even if the profits of the fund are retained, the annual withholding tax must be paid.
Pension funds (Pensionsinvestmentfonds)
The most important amendment is the introduction of pension funds as a new type of investment fund. Pension funds are subject to special regulations to protect shareholders. Pension funds are obliged to retain all profits to enhance the intrinsic value of the fund. They must comply with additional investment guidelines. No more than 50% of the assets may be invested in securities of foreign issuers. At least 30% of the assets must be invested in stocks, certain forms of participation capital and participating bonds. At least 30% must be invested in bonds, medium term bonds, convertible bonds, mortgage bonds, municipal bonds or federal treasury bills. These provisions are again aimed at ensuring an intrinsic value-oriented investment policy.
In addition to the introduction of new types of investment funds, the following amendments are of particular interest.
Investment funds now have the option to hand the management of the fund over to third parties. External fund management should give investment funds the opportunity to profit from the know-how of experienced and specialized fund managers. The amendment also enables the management to immediately dispose of all assets of the fund.
However, the external management does not affect the liability of the investment company vis a vis the shareholders of the fund.
Any advertising for the purchase of shares in an investment fund must refer to the prospectus published in accordance with the Capital Market Act (Kapitalmarktgesetz). Any marketing activity for domestic and foreign investment funds that refers to past performance of the fund must contain a note stating that past performance is not a reliable indication of future performance.
Peter Huber and Werner Löber