The investment policy description of ASI and the investment strategy description of ASI should be presented separately, taking into account the requirements set out for both the investment policy description and the investment strategy description.
The applicant for an entry in the ASI management register maintained by the Financial Supervision Commission shall submit an application with the required annexes, including, inter alia, a description of the investment policy and a description of the investment strategy of the alternative investment company which the applicant intends to manage. According to Article 70, section 2 point 4 Act dated 27 May 2004 the investment funds and the management of alternative investment funds (hereinafter ‘the Investment Funds Act’) shall be accompanied by a description of alternative investment companies, together with an indication of the names of those companies which the applicant intends to manage, including the planned total value of the assets included in the investment portfolios of those companies, and a description of the investment policy and investment strategy of each company.
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It follows from the above provision that the legislature has clearly differentiated the concepts of investment policy and investment strategy, even though they seem similar, synonymous. Therefore, although the concepts of "investment policy" and "investment strategy" may cover elements of a similar nature, they are, however, two separate and mandatory elements of the ASI description.
Investment strategy as a complement to investment policy
The investment policy description of ASI and the investment strategy description of ASI should be taken into account separately, taking into account the requirements set out for both the investment policy description (used here by analogy) Article 20 Funding Act), as well as for the description of the investment strategy (Article 5(2) Regulation (EU) 231/2013).
According to Article 70b The Investment Funds Act defines the investment policy of an alternative investment company to identify its assets. According to Article 20 The Investment Fund Act sets out the principles of the investment fund's policy to achieve the investment objective, and in particular:
- • the types and types of securities and other property rights to be invested by the fund;
- • criteria for selecting investments;
- • the principles of diversification of investments and other investment constraints;
- the amount of loans and loans entered into by the fund. 1a. The statutes of the investment fund in the investment fund's investment policy section shall specify the detailed, non-existing provisions of the Act, the principles of diversification of investments and other investment constraints.
However, according to the content Article 5 Regulation (EU) 231/2013, a description of the investment strategy, containing at least the following information:
- • the main asset categories in which ASI can invest;
- • any industrial, geographical or other market sectors or specific asset classes which are the subject of an investment strategy;
- • a description of the ASI’s borrowing or leverage policy.
The investment strategy therefore serves as a complement to the content of the investment policy by detailing the rules on the placement of ASI assets. A directory of typical investment strategies has been identified In Annex IV to Regulation (EU) 231/2013 (point 10 the template for the AIF report), which is not the case exhaustive, the application of other investment strategies is therefore not excluded. However, it is not sufficient to indicate only the name of the investment strategy chosen.
Particular attention should be paid to the fact that according to Article 70b(2) The investment fund laws and investment strategies are set out in the instruments of the alternative investment company and in the documents, including the rules, adopted by the ASI manager concerning activities conducted by ASI. It is therefore possible to clarify the description of the investment policy and investment strategies of the ASI and their implementation, including in particular sensitive information protected by company secrecy, in the rules adopted by the ASI manager concerning activities carried out by ASI which are not disclosed in the KRS and are not publicly available.
Elements of investment policy and investment strategy
According to the position of the Authority of the Financial Supervision Authority on the content of investment policy documents and investment strategy of an alternative investment company dated 5 March 2018 ASI's investment policy should start with an alternative investment company managing an alternative investment company, indicating a specific intention which will be pursued in the course of its investment activity by placing investor funds in a targeted manner and therefore the investment objective of ASI should be defined.
Another element of the investment policy should be the indication of the methods of achieving the investment objective, while taking into account the methods of reducing investment risks associated with the activities of ASI.
A description of the investment policy should respond to the question of how ASI will use the capital raised in order to achieve a beneficial investment result for investors.
The description of the investment policy should also allow investors to assess the risks associated with the acquisition of alternative investment company participation rights.
Furthermore, the definition in the investment policy of the types and types of securities and other property rights subject to ASI's investment should include exhaustive the calculation of all asset categories in which ASI can invest.
This calculation should be made in sufficient detail to ensure that there is no doubt about possible categories of ASI deposits.
Therefore, investment policy sets out a general framework for asset placement. The implementation of investment policy takes place at the stage of making specific investment decisions.
According to ESMA guidelines, ‘an undertaking which has a policy on how aggregate capital in an undertaking is to be managed in order to generate a combined return to investors from which it has been acquired should be considered to have a specific investment policy in accordance with Article 4(1) point (a) point (i) Directive AIFM’.
In conclusion, the investment policy and investment strategy should be described separately, both in the instruments of incorporation and in the internal regulations of the ASI. Under the Investment Funds Act, there are concepts of different meanings, although in common language they may seem synonymous.
It should also be noted that documents in the form of investment policy and investment strategy of ASI should be coherent, clear, mutually contradictory. These documents should constitute internal acts of an alternative investment company adopted in accordance with the principles of representation.
Author: Michał Wasilenko
Lawyer, Senior Associate in the Legal Department, member of the Bar Association in Lublin, graduate of the Faculty of Law and Administration at Maria Curie-Skłodowska University in Lublin. He specializes in commercial and civil law law.