Non-retail pooled funds

Available vehicles

What are the main legal vehicles used to set up a non-retail fund? How are they formed?

Non-retail funds are commonly referred to as being funds solely available and eligible for professional investors.

Different types of legal vehicle may be used for the establishment of a non-retail fund and in general the fund type will govern the choice of vehicle. In this context, and from a Norwegian perspective, non-retail funds comprise AIFs.

The main legal vehicles used to set up non-retail funds in Norway are investment funds, limited liability companies and limited partnerships considered AIFs. Limited liability companies are formed through the signing of a memorandum of association, while limited partnerships are formed through the acceptance of the partnership agreement.

Norwegian private equity funds and real estate funds are primarily formed as limited partnerships but may also be formed as limited liability companies. An essential difference between a retail fund and a non-retail fund is that the latter does not have to be separate from the fund manager and merely consist of the fund assets. Consequently, a non-retail fund can be a legal person with the ability to assume rights and obligations. Furthermore, a non-retail fund could be internally or externally managed. In the former case, the fund is the manager and the entity is required to possess all functions necessary to be able to comply with applicable laws and regulations.

Laws and regulations

What are the key laws and other sets of rules that govern non-retail funds?

Funds that are solely marketed and sold to professional investors are regulated by the fund’s rules, the IFA and the AIFMA, but are exempted from the particular statutory requirements protecting non-professional investors, such as investment restrictions and redemption and subscription rights. Specific regulations regarding the marketing and sale to professional investors are set out in Chapter 6 of the AIFMA.


Must non-retail funds be authorised or licensed to be established or marketed in your jurisdiction?

With the exception of non-retail funds in the form of domestic funds or special funds, subject to the IFA, there is no requirement to obtain authorisation for the establishment of a non-retail fund (AIF). The activities requiring authorisation are, instead, the management of a non-retail fund (see the AIFMA regarding implementing the AIFMD). Marketing is subject to notification (see the AIFMD and AIFMA) and licence for managers established outside the EEA.


Who can market non-retail funds? To whom can they be marketed?

Anyone can market a non-retail fund, provided that the marketing does not go beyond the concept of ‘promotion’. The marketing entity would not need to be licensed or authorised unless the marketing activities include the offering of the funds or would otherwise require a MiFID II licence or authorisation pursuant to the AIFMA.

As a main rule, non-retail funds may only be marketed to professional investors as defined in the STA and the Norwegian MiFID II regulation (implementing MiFID and MiFID II). Marketing of non-retail funds to non-professional investors is subject to a licence requirement for each fund. In addition, special requirements for sound business conduct will apply, effectively limiting the ability to market non-retail funds to non-professional investors to an extent that only leaves a small window for compliant marketing.

Ownership restrictions

Do investor-protection rules restrict ownership in non-retail funds to certain classes of investor?

No. Even though a non-retail fund may only be marketed to retail investors subject to certain prerequisites, there is no prohibition on an investment being made by a retail investor on a reverse-solicitation basis.

Managers and operators

Are there any special requirements that apply to managers or operators of non-retail funds?

Fund managers of AIFs directed at professional investors are required to establish arrangements to avoid the funds being marketed to retail investors. In general, however, there are fewer requirements imposed on managers of non-retail funds as opposed to managers of retail funds. Special regulations for domestic funds and special funds, which may be considered non-retail, are set out in Chapter 7 of the IFA, and special regulations for the marketing of AIFs that are not domestic funds are set out in Chapter 6 of the AIFMA.

Tax treatment

What is the tax treatment of non-retail funds? Are any exemptions available?

Non-retail funds organised as investment funds are subject to the same tax regulation as described in question 18.

Non-retail funds organised as a limited liability company will be covered under the participation exemption method and be tax-exempt for gains on shares in, and distributions from, companies resident in the EEA. Such funds will also be tax-exempt for gains on shares in, and distributions from, companies outside the EEA provided that the fund holds at least 10 per cent of the share capital for a period of at least two years and that the company is not resident in a low-tax jurisdiction. However, 3 per cent of dividends, which is exempt under the exemption method, will be subject to a taxation of 23 per cent. Interest income of non-retail funds that are organised as limited liability companies will be taxed at 23 per cent.

Non-retail funds that are organised as partnerships will be treated as transparent entities for tax purposes and taxed in the hands of the partners. Any partner of the partnership that is organised as a limited liability company will thus be covered under the participation exemption method to the same extent as if the investment was done directly by the partner.

Interest income of non-retail funds that are organised as partnerships will be taxed at 23 per cent in the hands of the partners.

Asset protection

Must the portfolio of assets of a non-retail fund be held by a separate local custodian? What regulations are in place to protect the fund’s assets?

Managers of AIFs shall ensure that a single depositary is appointed for each AIF it manages. The AIFMA implements the AIFMD regulations on depositaries and funds’ assets protection, including depositary qualifications and regulations regarding, inter alia, liability, control, cash management, conflict of interest, outsourcing and reporting to the NFSA. See question 19.


What are the main governance requirements for a non-retail fund formed in your jurisdiction?

The manager of non-retail funds shall comply with the governance requirements set out in the AIFMA, implementing the AIFMD. These include conducting operations in a professional manner so that the public’s confidence in the fund market is maintained, as well as adequate risk and liquidity management, handling of potential conflicts of interest and establishing a remuneration policy compatible with such requirements, designation of a depositary and filings to the NFSA. Members of the board, the general manager and other executive officers in the management company must satisfy the fit and proper requirements at all times.


What are the periodic reporting requirements for non-retail funds?

AIFMs shall provide a report to the NFSA on a semi-annual basis.

The reporting requirements regarding non-retail funds vary depending on the fund type and the value of assets under management. In general, the manager or the fund (as the case may be) must report more frequently and in greater detail in relation to funds that are marketed to retail investors and whose asset value exceeds certain thresholds. For funds applying gearing, reporting requirements are found in the Commission Delegated Regulation (EU) No. 231/2013.