An investment fund opening, structuring and management are extremely complex task, especially if talking about such jurisdictions as Japan. In this material, we would like to discuss some aspects that should be considered when you have made up your mind to establish a foreign investment fund in Japan. The article is designed for informational purpose only, and cannot be considered as legal advice. We recommend contacting IQ Decision UK professional consultants who will select timely individual solutions for specific investment tasks in Japan before creating a foreign investment fund and offering its shares to potential investors.
Normally, retail funds in Japan are designed as open-end investment funds which are managed by professionals with extensive experience in the stock market. Usually, the fund managers are quite wealthy people who have already earned serious money. They manage their own money effectively, and yet, for a certain fee, they can manage other people's money.
Funds do not invest in securities of only one enterprise. They create the so-called "portfolio" by buying securities of many issuers. This significantly reduces portfolio risk. By purchasing investment certificates or stocks of funds, you acquire part of the "portfolio" compiled by professional investment managers.
The activities of funds are very tightly controlled by the state. Daily reporting to participants of open-end funds makes such investment funds one of the most transparent investment tools.
Funds of this type provide an opportunity redeem shares at any time to ensure the liquidity of the fund. But restrictions may be imposed on the repurchase or purchase of shares in retail funds in Japan. Such special conditions must necessarily be an integral part of the legal documents of the foundation.
Advantages of Open-End Investment Funds
The main advantage of an investment fund is that the investor, participating in collective investment with relatively small funds, takes full advantage of professional management in the stock market. Even a small amount invested through the fund will be diversified, thereby reducing risks. Other benefits include:
- maximum availability and transparency of information on the activities of the fund;
- tight control over the activities of the fund by state bodies;
- preferential taxation - IF does not pay income tax.
How to Set Up a Retail Fund in Japan
In order to register an investment trust in Japan, an agreement with the trustee has to be drafted and then signed. Before signing an agreement with the trustee you will need to file an application to get a license for Investment Activities in Japan from FIEA, ITA or LITIC. Please note, that the latter governs the activities of investment corporations in Japan.
According to the Law, a trust management agreement must be concluded between the operator, who must be the investment manager, and the trustee, who must be a trust company.
If trust funds are publicly offered to a wide range of retail investors through securities companies, you will have to file an application for registration of the securities issue with the Financial Services Agency.
Shares For Sale
Want to sell an investment fund shares directly to investors? Please be informed that you can do it only after you got registered as a company specializing in Type II financial instruments. However, if the trust offers investment shares publicly, it is a normal practice to engage a third-party securities firm. It is quite logical that if you want to sell the Type I securities, it is necessary to register a company in Japan specializing in Type I financial instruments. An investment fund shares can be sold to an unlimited number of interested persons.
If you are interested in doing business in Japan and intend to register a retail fund in Japan, IQ Decision UK experts will provide expert assistance and provide the necessary support. You can also request comprehensive legal advice on managing retail funds in Japan.