The current turbulent period and uncertainty in the financial markets may not be perceived positively, but it also provides opportunities for new investments. This also raises questions about how to invest, including with regard to the life cycle of the investment and future investment intentions. We also discussed this with Rastislav Roško, who answered current questions.

Trust funds are often mentioned nowadays as one of the alternatives for the arrangement of property for the outgoing generation of investors. What are their advantages?

At the outset, it should be said that the concept of trusts has been known around the world for several hundred years, particularly under the term trust. Just out of curiosity, for example, even the famous hockey trophy for the winners of the NHL is owned by a trust. Nevertheless, this institute is absent from the Slovak legal order, and the Slovak Republic is not even a party to the Hague Agreement on trusts. Although the possibility of introducing it into our system is still under consideration, there are possibilities of using other jurisdictions, such as the Czech legislation, which is close to ours.

The practical use I see is precisely that it allows investors who, for various reasons, have not yet decided on a succession strategy to have time to sort things out for future generations without having a fatal impact on their business in the event of an adverse circumstance.The advantage lies precisely in the fact that the property can be disposed of freely, it will be possible to skip a generation of heirs or legal heirs, protect the property values and perhaps continue building the dynasty.On the other hand, it is not the most appropriate form for actively managing, expanding or disposing of investments, or making them available to other investors, which is what funds with professional active management could be used for.

So what is the alternative to unit trusts?

Although trusts have been operating in the Czech Republic since 2014, there is still a lack of a sufficiently robust application practice that would also provide answers to different life situations. Moreover, they do not allow either more active asset management or tax planning as is common in the world.For more active investors, therefore, various options under the generic name of alternative investment funds are suitable.These have been gradually introduced in response to a European directive which introduced their minimum standards of investor protection and regulation.

The Directive established regulated funds, but still allows for a "lighter" version that retains flexibility in their management and represents a cost-interesting alternative.

Regulated funds are managed by professional management companies that are subject to strict supervision and therefore provide investors with the comfort that their investments will be looked after in line with the fund's investment strategy, its risk profile and market standards.Therefore, this alternative is suitable for professional investors, who will be provided with a full service by the fund manager, which includes mandatory AML procedures, project risk monitoring, investment management, portfolio valuation and the implementation of exit strategies.

Each fund has its own investment strategy, individual investments are made by the manager where the investor has no direct influence on their implementation. Therefore, it is an interesting alternative for those who are looking for opportunities to invest without having to worry about the day-to-day management of the investments, or those who are looking for project co-investment opportunities and are willing to share the returns fairly with other investors, with no investor gaining decisive rights over the project being financed.In addition, this also allows investors to diversify their portfolios, as the fund seeks and invests in multiple investment opportunities, thus allowing risk to be spread across multiple projects.

So what are the benefits of investing through an investment fund?

The most important advantages include virtually unlimited investment opportunities, of course in accordance with a predetermined investment strategy, diversification of risks, investments in a wide variety of assets ranging from real estate, securities, works of art to private equity.

In principle, the subject of investment can be anything that is legal, monetisable and can be controlled by the fund's custodian. An interesting area is cryptoassets, which are slowly making their way among investors and funds, but a number of issues related to their security, transparency, and controllability are preventing their massive expansion as an investment target for regulated entities.

The high standard of supervision, which is shaped not only by national regulations but also by the European Supervisory Authority's guidelines, is another indisputable advantage.All of this also entails higher costs that investors have to take into account, which may not always be perceived positively, but I think that the consideration they receive in return is commensurate with this. 

Finally, there is also an attractive tax advantage, but this varies from state to state and, again, this area is affected by the recent changes in cross-border income taxation.

It is clear that we are lagging behind in the use of alternative investment funds. What do you see as the key areas that could increase the interest of potential investors?

In general, I think there are three areas where we need to adjust the environment to make it attractive for the fund industry in Slovakia.

First of all, a change in company legislation, which has been slow to respond to developments in other countries and, despite efforts to innovate, still protects entrepreneurs from themselves and does not allow for looser contractual arrangements of the basic documents to match the will of their shareholders or partners. I hope that in the foreseeable future this voice will be heard after the changes made by practice and will allow, if not the creation of new forms of companies, then at least more liberal regulations of their internal relations.

Another ingredient is flexible and responsive regulation.It is worth considering whether such an attractive sector deserves clear and unambiguous regulation in a separate law that deals only with alternative investment funds and related issues, rather than combining them with other more traditional forms of collective investment, which have different standards and methods of regulation and investor protection. 

It would also facilitate the supervision of the activities of management companies, the predictability of the regulator's requirements and, ultimately, contribute to the relationship between regulator and manager moving more towards a constructive dialogue.

Incentive tax treatment will also help to increase the attractiveness of the environment. We must not forget that European directives have facilitated the functioning of the single market in this sector as well, and both investors and administrators are looking for the most favourable conditions. These may not just be the lowest tax rate, but a mix of a number of parameters that will deliver maximum value for money. I am convinced that, at least in terms of human and professional capacity, we are competitive.