Ljubljana - The government adopted on Friday a draft bill on the forms of alternative investment funds that envisages three forms and two types of funds. The long-awaited bill, with which the state wants to strengthen the capital market, is one of the milestones for the payment of the first instalment from the Covid recovery mechanism.

The three forms of alternative investment funds are alternative mutual fund, special limited partnership and investment company, while the two types of alternative funds are special investment fund and real estate investment company.

The bill, which will be fast-tracked in parliament, specifies in detail the characteristics and conditions for the establishment and operation of these forms and types of funds.

According to the Finance Ministry, the bill will increase the legal security of providers and investors in alternative investment funds, while also improving the conditions for equity financing, especially of small- and medium-sized enterprises.

While managers of alternative investment funds for professional investors are regulated by an existing act, which was slightly amended last year, this act only defines the managers of these funds, but not also their forms, the ministry noted.

This is not optimal from the point of view of investors' interest in these products, and does not ensure effective control, the ministry said, adding that it was thus necessary to adopt a special bill on forms of such funds.

It said that the current legislation was "very open" and allowed for several possible forms of alternative investment funds, while the new bill would allow for the three forms that had proven to be the most suitable in the Slovenian capital market.

The new regulation of the forms and types of alternative investment funds, conditions for their establishment and operation, management techniques, definition of documents for disclosure to investors and supervisory powers is expected to make it easier for the Securities Market Agency to carry out supervision.

The ministry also assessed that the proposal enables greater transparency of this segment of the market and to reviving the capital market in Slovenia as an alternative to banking sources.

Its implementation could open up new investment opportunities for foreign investors who are reluctant to invest in Slovenian investment funds because legislation is not optimal, it added.

One of the important new possibilities is transforming an existing company into a real estate investment company for small investors.

Slovenia has envisaged the strengthening of capital markets as a reform as part of the recovery and resilience plan, which is the basis for drawing funds from the EU recovery and resilience mechanism, the ministry noted.

Such a bill is one of the measures from this reform and also a condition that the state must fulfil in order to draw the first instalment of grants the amount of EUR 57 million. It has also been the wish repeatedly expressed by the financial sector.