Why the Amendment Should Also Matter to Investors Outside the Financial Sector
When the regulation of investment funds is discussed, most entrepreneurs or owners of family wealth tend to regard it as a matter relevant only to banks, investment companies and financial institutions. In reality, however, changes in fund regulation often have a significant impact on family wealth management, holding structures, qualified investor funds and vehicles used for intergenerational wealth transfer. In recent years, qualified investor funds have become a popular instrument for managing larger asset portfolios. They are used by entrepreneurial families, investors and corporate groups seeking an efficient way to hold and manage assets. For this reason, the amendment to the Investment Companies and Investment Funds Act (ZISIF), approved by the Chamber of Deputies in its third reading on 27 May 2026, deserves close attention.
The principal objective of the amendment is to implement the European AIFMD II Directive. At the same time, however, the Czech legislature has taken the opportunity to address practical experience gained from applying the existing legislation. The result is a package of changes that will affect both the regulatory obligations of investment funds and their day-to-day operations.
Europe Responds to Lessons Learned from Recent Crises
A substantial part of the amendment is based on the European AIFMD II Directive. The Directive reflects the experience gained by European regulators in recent years, particularly during the COVID-19 pandemic, the energy crisis and the period of increased volatility in the financial markets. It became apparent that certain fund structures may encounter difficulties when investors seek rapid redemptions while the fund holds assets that cannot easily be liquidated. Typical examples include real estate funds, infrastructure investments and certain types of private equity funds. For this reason, liquidity management tools have become one of the key elements of the amendment.
New Liquidity Management Tools
The amendment introduces a requirement to use so-called Liquidity Management Tools (LMTs). Put simply, these are mechanisms designed to deal with situations in which there is a mismatch between the liquidity of a fund's assets and investors' redemption requests. Under the proposed legislation, the manager of an open-ended fund will be required to implement at least two liquidity management tools. Money market funds will only be required to use one such tool. This is not merely a formal obligation. Fund managers will also have to demonstrate that the selected measures are appropriate in light of the fund's investment strategy and the nature of its assets.
From an investor's perspective, this change can be viewed positively. The purpose of the new rules is to enhance the stability of investment funds during periods of market turbulence and to reduce the risk that liquidity problems could adversely affect investors. On the other hand, some fund managers point out that the additional regulatory requirements will increase both costs and administrative burdens.
Stricter Oversight of Delegated Functions
Another significant change concerns the delegation of various functions to third parties. In the modern investment fund industry, it is common practice for fund managers to engage external specialists to perform certain activities, such as administration, asset valuation, risk management or other specialised services. European regulators have long warned, however, of the risk that some fund structures may be managed almost entirely by external service providers, while the fund manager itself performs only minimal activities. The amendment therefore extends the rules on delegation to additional areas of activity and introduces new reporting obligations towards the Czech National Bank. Information regarding delegated functions will have to be provided already during the licensing process and subsequently updated on a regular basis. The objective is to ensure that the regulator has a clearer overview of who actually performs the key functions in the management of an investment fund.
Opening the Door to Foreign Depositaries
One of the most noteworthy changes is the possibility of appointing foreign depositaries. Until now, the range of entities permitted to act as depositaries has been relatively limited. Under the amendment, a bank established in another Member State of the European Union may, under certain conditions, also perform the role of depositary, even without maintaining a branch in the Czech Republic. This option will not, however, be available automatically. It may only be used by qualified investor funds and special funds, and only where no suitable solution is available on the Czech market. In addition, an opinion from the Czech National Bank will be required. Proponents of this change argue that it will provide the Czech investment fund market with greater flexibility and better access to specialised services available in other Member States. Critics, by contrast, point to potential difficulties in regulatory supervision and the resolution of cross-border disputes.
New Opportunities for Investment Companies
The amendment does not merely introduce new obligations. In certain areas, it also expands the range of activities that investment companies and self-managed funds may undertake. They will newly be permitted, for example, to manage securitisation special purpose entities, administer non-performing loans or act as benchmark administrators. At first glance, these changes may appear highly technical, but their significance extends far beyond regulatory detail. Their purpose is to ensure that the Czech investment fund market remains competitive in comparison with other European jurisdictions and that investment companies are not forced to relocate certain activities abroad.
Funds Investing in Receivables Subject to Increased Supervision
One specific area addressed by the amendment concerns funds focused on acquiring receivables arising from fund loans. This segment has grown significantly in recent years and is becoming increasingly important within the field of alternative financing. The amendment therefore introduces more detailed requirements regarding the governance and internal control systems of managers of such funds. Its objective is to ensure that these funds have appropriate risk management processes and effective internal control mechanisms in place. It can be expected that the Czech National Bank will devote increased supervisory attention to this area in the future.
What the Amendment Means for Family Wealth Management
Although the amendment may appear to concern only the financial sector, its effects will also be felt in the area of family and business wealth management. Qualified investor funds are now frequently used as an alternative to holding structures or trusts. They provide an efficient framework for managing assets, separating ownership from management and, in certain cases, facilitating the transfer of wealth between generations. Investors and families making use of such structures should therefore closely monitor the evolving regulatory requirements, the available asset management options and the costs associated with operating investment funds. At the same time, the amendment confirms a long-term trend in European financial regulation: an increasing emphasis on transparency, risk management and investor protection.
Investment funds, holding structures, trusts and other wealth management vehicles are becoming an increasingly important part of long-term wealth planning for entrepreneurial families and investors. We provide legal and tax advisory services in the areas of wealth management, family structures, qualified investor funds and intergenerational wealth transfer. If you would like to understand how the proposed changes may affect your investment or asset structure, we would be pleased to discuss your specific situation with you and recommend an appropriate solution.
