Publication date: June 02, 2025
According to art. 3 sec. 1 of the Act of 27 May 2004 on investment funds and management of alternative investment funds, an investment fund is a legal person whose exclusive business activity is to invest funds collected by proposing the purchase of participation units or investment certificates in securities, money market instruments and other property rights specified in the Act. This means that the sole purpose of such a fund is to invest money that has been collected from people. The investment must meet the principles specified in the Act. It is worth noting that an investment fund acquires legal personality only upon entry into the register of investment funds.
The Act in art. 14 introduces a classification of investment funds based on the division of funds into: open-end investment funds, specialist open-end investment funds and closed-end investment funds. It should be noted, however, that in accordance with art. 3 sec. 4 of the Act on investment funds and management of alternative investment funds, an investment fund may operate as an open-end investment fund or an alternative investment fund – a specialist open-end investment fund or a closed-end investment fund.
Therefore, two basic types of investment funds can be distinguished, namely:
• an open-end investment fund and
• an alternative investment fund.
A specialist open-end investment fund or a closed-end investment fund are subtypes of an alternative investment fund. This article will analyze the nature of each of them and the differences between them.
It is worth starting with the considerations of how to create an investment fund. The procedure for establishing an investment fund is specified in the Section II of the Act of 2004. According to Article 14 of the aforementioned Act, an investment fund may be created only by an Investment Fund Company, which manages it and also represents it in relations with third parties. However, it should be emphasized that the Company may not participate in the capital of the fund in any way. Moreover, the name of the fund should include a description of the type of investment institution, and if the statute so provides, abbreviations may be used in the name. In order to legally create a fund, it is necessary to meet the conditions specified in Article 15. These include the obligation to:
Granting the statute is a unilateral legal act that starts the procedure of creating an investment fund. This statute defines the organization of the fund and contains important information for investors. The statute and any amendments thereto must be in the form of a notarial deed. Failure to comply with the required form results in the sanction of invalidity. The mandatory provisions of the statute are listed in art. 18 sec. 2 of the Act on Investment Funds and Management of Alternative Investment Funds. The statute may also contain optional provisions that are included at the will of the body of such a fund. The statute should specify, among other things: the name and type of the fund; the company name, registered office and address of the Company or management company; the bodies of the fund and the manner of its representation.
Another essential element of the procedure for establishing an investment fund is concluding an agreement to perform the function of a depositary, which is an institution of public trust. It plays the role of ensuring the legal security of the investment fund. Concluding such an agreement is a necessary condition for the Investment Fund Company to submit an application for a permit to establish an investment fund. The agreement between the Investment Fund Company and the depositary is concluded in writing. The depositary may only be one of the following entities:
The issuance of a permit by the Polish Financial Supervision Authority is another necessary condition of the procedure for establishing an investment fund. The Act of 2004 assumes that in order to establish an investment fund, a joint-stock company is required to obtain two permits: for the performance of activities by an Investment Fund Company, which is necessary for the Company to commence its activities, and the appropriate permit for the establishment of an investment fund. The party to the proceedings is always the Investment Fund Company, which performs factual and legal actions aimed at establishing a fund in its own name and on its own account, while the fund enters into rights and obligations only upon entry in the register of investment funds. In addition, the founder is required to collect contributions to the fund. Contributions to the fund are collected in the form of subscriptions for participation units in the case of open-end funds and specialist open-end funds, and investment certificates in the case of closed-end funds. A subscription is therefore an order to purchase participation units or investment certificates of an investment fund, submitted during the establishment of the fund. Subscriptions may begin no earlier than the day following the date of delivery of the permit to establish an investment fund, and in the case of a closed-end investment fund of non-public assets – within the time specified in the statute. The acceptance of subscriptions may never last longer than 2 months.
The entry in the register of investment funds is made by the founder. This register is maintained by the district court in Warsaw. In addition, the Company is obliged to notify the financial supervision commission about the establishment of the fund immediately after its entry in the register of investment funds.
Therefore, the creation of an investment fund in Poland is regulated in detail in the Act of 2004 and can only be carried out by an Investment Fund Company. The creation procedure includes five key stages, each of which is obligatory and conditions the legal functioning of the investment fund on the financial market. The process of creating an investment fund is highly formalized, as it serves to protect the interests of investors and ensure the stability and transparency of the financial market.
The first of the three basic statutory types of funds is the open-end investment fund. An open-end investment fund is an investment fund that issues units as participation titles in the fund and then redeems them at the request of a fund participant (Article 82 of the Act on Investment Funds and the Management of Alternative Investment Funds). The fund is managed by the Investment Fund Company that created it. The Investment Fund Company is responsible for the current management of the fund, making investment decisions, conducting its affairs and representing the fund. It may also outsource the management of the investment portfolio to another entity (e.g. an investment company), in accordance with Articles 45–46a of the Act on Investment Funds and the Management of Alternative Investment Funds. In principle, funds of this type are intended primarily for non-professional (retail) investors. Open-end funds, as collective investment institutions aimed at an unlimited circle, are required to conduct a much more prudent investment policy than a specialist open-end investment fund and a closed-end investment fund. This is to aim to limit the risk of losses incurred by the fund to the maximum possible extent (which does not guarantee avoiding such a loss). A share unit of an open-end investment fund is a participation unit, which is a legal title entitling one to a share in the assets of an open-end investment fund or a specialist open-end investment fund.
Participation units represent the property rights of fund participants. According to Article 83 of the Act, the fund cannot differentiate the property rights of fund participants who hold participation units of the same category. The primary function of a participation unit is to facilitate the determination of the amount of money due to the participant from the fund at a given time. The statute of an open-end investment fund specifies the frequency of sale and redemption of participation units – however, this cannot take place less than once every 7 days.
Fund units may be sold in Poland directly by the fund or through:
Moreover, an open-end investment fund is required to maintain a register of fund participants, which specifies, among other things, the participant’s identification data and the number of units held by him. It should be noted that the Act introduces emphasis on the principle of equality in relation to all participants holding units of the same category, i.e. legal titles to participate in the fund of the same category. It is also worth noting that the principle of uniformity is associated with both the impossibility of reducing the rights of some participants and the granting of additional rights to a specific group of participants.
In an open-end investment fund, a meeting of participants is convened to express consent to:
Participants entered in the register of fund participants as of the end of the second business day preceding the day of the participants’ meeting are entitled to participate in the meeting. The list of participants entitled to participate in the participants’ meeting is prepared by the entity maintaining the register of fund participants and forwarded to the Company on the business day preceding the day of the participants’ meeting. The meeting is convened by the Investment Fund Company, which notifies each participant individually, at least 21 days before the planned date of the meeting.
An open-end investment fund stands out from other types of funds primarily due to the high frequency of selling and redeeming participation units – this occurs at least once every seven days. By their nature, these funds issue liquid participation instruments, which favors short-term investments. Their investment policy generally avoids investing funds in illiquid assets. An example of this approach is the exclusion of property rights to real estate from possible investments – this category, unlike closed-end funds, is not allowed in open-end funds.
The next type of investment fund in line are specialist open-end investment funds. They are a type of alternative investment fund, i.e. a collective investment institution whose business, including within a separate subfund, is to collect assets from many investors in order to invest them in the interests of these investors in accordance with a specific investment policy, which is not a fund operating in accordance with the Community law regulating the principles of collective investment in securities. This is an intermediate structure between an open-end investment fund and a closed-end investment fund.
As a rule, legal solutions concerning specialist open-end investment funds are based on the appropriate application of the provisions concerning open-end investment funds, and solutions characteristic of closed-end investment funds are also applicable here. Nevertheless, the application of the provisions on open-end investment funds is subject to significant restrictions indicated in art. 113–116d of the Act on Investment Funds and the Management of Alternative Investment Funds, specifying mainly the principles of operation of specialist open-end investment funds, permissible purposes of convening meetings of participants, conditions for establishing an investors’ council and principles of investment by specialist investment funds. A significant difference between specialist open-end investment funds and open-end investment funds is the entities that may become participants in such a fund. In open-end investment funds, participants may be natural persons, legal persons and organizational units without legal personality that meet the requirements specified in art. 6 sec. 1 of the Act on Investment Funds and the Management of Alternative Investment Funds. In the case of specialist open-end investment funds, participants may be entities specified in the statute or those that meet the conditions specified in the statute. Therefore, the fund’s statute defines the group of people who may be participants or the criteria that must be met to become a participant in such a fund. Moreover, in the case of specialist open-end investment funds, it is possible to limit the possibility of redeeming participation units by the fund by indicating the conditions for its admissibility, the deadline for submitting an intention to request the redemption of units or the deadline for paying the amount due to the redemption of participation units.
Investment limits are another difference between specialist open-end investment funds and open-end investment funds. In the case of open-end investment funds, statutory restrictions apply to the composition of the investment portfolio, aimed at ensuring appropriate diversification and limiting risk. A specialist open-end investment fund, on the other hand, may have other investment limits, specified in the fund’s statute, which allows for a more flexible investment policy tailored to the needs of investors. Another difference is the possibility of establishing an investors’ council in a specialist open-end investment fund. This is a body that can supervise the implementation of the investment objective and investment policy of the fund. The mode of operation of the investors’ council is specified in the statute of the specialist open-end investment fund. In open-end funds, such a council does not exist.
A significant difference also concerns the principles of fund management. In the case of an open-end investment fund, the Investment Fund Company may entrust the management of the fund to another management company operating in Poland. In the case of a specialist open-end investment fund, such a possibility has been excluded – the Investment Fund Company may not transfer the management of the fund to another management company, but may commission the management of the investment portfolio to an entrepreneur or a foreign entrepreneur, under the principles specified in the Act on Investment Funds.
The last difference is the issue of participants’ meetings. Before June 4, 2016, specialist open-end investment funds could not convene such meetings. Currently, the regulations allow for such a possibility, which gives fund participants a potentially greater influence on its functioning. In the case of open-end investment funds, the possibility of convening participants’ meetings also exists, although it is not widely practiced.
In summary, a specialist open-end investment fund is a more flexible and advanced form of an open-end fund, intended primarily for more experienced investors who expect greater influence on the fund’s investment policy and broader possibilities in terms of investment strategies.
A closed-end investment fund is a form of investment fund that is characterized by greater flexibility in terms of investment policy and a different method of investor participation compared to an open-end investment fund. It is also managed by the Investment Fund Company that created the fund. The Investment Fund Company has full responsibility for managing the fund’s affairs and for managing its investment portfolio. Unlike a specialist open-end investment fund, the Investment Fund Company may delegate the management of the investment portfolio to other entities (under the principles of art. 45–46a of the Act on Investment Funds and the Management of Alternative Investment Funds), and in certain cases, entrust other functions related to management (e.g. bookkeeping or administrative services). A closed-end investment fund is a legal person that issues investment certificates that are securities. These certificates may be offered as part of a public offering, admitted to trading on a regulated market or introduced to an alternative trading system, if the fund’s statute so provides. Investment certificates of a closed-end investment fund may be in the form of a registered or bearer certificate, whereby in the case of public funds only bearer certificates are permitted. These certificates are indivisible and their redemption is possible only in cases provided for by law. It is also possible to transform registered certificates into bearer certificates.
In principle, a closed-end investment fund cannot acquire its own investment certificates, but the statute may provide for the possibility of their redemption, provided that they are fully paid up. In such a case, the fund’s statute must precisely define the rules for redemption – including the premises, procedure, conditions and method of announcing the redemption of certificates, and also indicate whether the redemption takes place at the request of the participant or regardless of such notification. The redemption price of a certificate corresponds to the net asset value of the fund attributable to a given certificate, established on the redemption date. Upon redemption, the certificates are cancelled by operation of law.
Unlike a closed-end investment fund, an open-end investment fund issues participation units that do not have the nature of securities and can be acquired and redeemed continuously, at the request of the participant. An open-end investment fund is characterized by high liquidity and availability, is intended mainly for a wide range of individual investors, and its activity is regulated by rigid investment limits resulting from the act. Moreover, participation units do not have a material form, and confirmation of their possession is a written confirmation issued by the Investment Fund Company of the sale and then redemption of units by the fund. Thus, participation units have primarily record-keeping and settlement significance.
Moreover, a closed-end investment fund differs from an open-end investment fund in that it is not required to obtain a permit from the commission to establish the fund. The Act on Investment Funds provides for an exception, as establishing a closed-end investment fund of non-public assets does not require a permit, but only informing the Commission about the fact of its establishment, in accordance with Article 15, Section 7 of the Act on Investment Funds and Management of Alternative Investment Funds.
The main differences between a closed-end investment fund and an open-end investment fund therefore concern the form of participation, investment liquidity, availability and scope of possible investments. A closed-end investment fund offers much greater investment freedom – it allows investing in less liquid assets, such as real estate or non-public instruments – but at the cost of lower liquidity and more limited access for the average investor. A closed-end investment fund is therefore a solution aimed primarily at institutional investors and more experienced individual investors who are ready to accept a longer investment horizon and a higher level of risk in exchange for potentially higher profits.
To sum up, the differences between an open-end investment fund and a closed-end investment fund are as follows: