What type of investor is suitable for alternative funds?
- Investors with high tolerance for risk and volatility. Even if the reported volatility may seem lower (due to periodic rather than daily valuations), the economic risk is significant: projects that may fail, unlisted companies, niche markets, leverage. Such investors must accept scenarios involving significant partial losses.
- Investors with a long-term horizon and capital. Alternative investment funds are more suitable for individuals or institutions that have surplus capital and do not depend on that money for current expenses or short-term objectives. Institutions (pension funds, foundations, family offices) are typical users of this type of product for this very reason.
- Sophisticated or well-advised investors. The AIFMD regulation and Romanian legislation distinguish between retail and professional/qualified investors. Many alternative investment funds are designed primarily for the latter, as the analysis of risks, structure, and documentation requires financial training or professional support (consultant, wealth manager, lawyer).
- Investors who understand the regulatory and legal framework. Because alternative investment funds allow for more flexible strategies, investors need to pay attention to: who the manager is (AIFM/SAI), who the depositary is, what reporting and transparency obligations exist, how liquidity and leverage risk is managed. Recent changes in Romanian legislation (including those regarding the possibility for alternative investment funds to grant loans) increase the role of due diligence prior to investment.
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