A "Christmas surprise" is coming for private investors and their asset managers in Hungary, because the institutional structure will loosen up for them next year, while large market players and standard service providers in the finance industry might have to pay more, according to Gyula Bihari Horváth, senior attorney at DLA Piper.
The parliament passed new laws in December, which will have an impact on the local capital and financial markets. The new law is set to do away with a considerable amount of burden in the legal environment.
"Regulation of collective investment vehicles and asset management has never been amongst the most business-friendly fields in Hungary. Having long waited by some, now the regulator recognized and abolished some unreasonable burden in the legal environment (trying to catch up with the more flexible playing field within the EU), reshaping private structures to be more attractive for low and mid-size investments," Bihari Horváth says.
The changes mean that certain investment funds, as well as fund managers, will cease to be under constant supervision by the National Bank of Hungary (MNB).
The expert says that the supervision will end completely on January 1, 2020 for intra-group structures and sub-threshold PE/VC (private equity/venture capital) structures. The change is expected to cut direct costs and administrative burden significantly. Paying a supervisory fee to MNB will no longer be necessary for them.
"There is no regulatory ease, on the other hand, for AIFMs [Alternative Investment Fund Managers] managing real estate AIFs or securities AIFs, or PE/VC AIFs exceeding a total portfolio value of EUR 500 million (unless they qualify as intra-group). There is no favor for UCITS [Undertakings for Collective Investment in Transferable Securities] management companies either. Quite the opposite, they will be required to pay more to the MNB budget, just as investment firms," the expert adds.
Bihari Horváthʼs complete analysis of the new law and its effects is available here.