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| Strategic Investment Funds
the accountability and transparency of board members and management. An example of this is the Malaysian SWF, Khazanah Nasional Berhad (see table 3.4). Khazanah was incorporated as a public limited company under Malaysia’s Companies Act 1965. It is therefore subject to all provisions of Malaysian corporate and tax law, with no exception granted to it because of its ownership by the government. Such provisions discipline Khazanah’s governance and disclosure requirements, as well as its hiring policies related to specific ethnic groups. Khazanah is also not tax exempt: it pays the same corporate tax rate applied to all Malaysian companies. India’s NIIF represents an evolution in the legal model for a SIF sponsored by a government in that NIIF is subject to private equity regulation. Although mixed capital funds set up by development finance institutions are typically subject to private equity regulation, India’s NIIF is unusual as a mixed capital SIF sponsored directly by the government of India and subject to private equity regulation because of the need to attract investors at the fund level. As mentioned previously, all three funds of NIIF are Category II funds under the Alternative Investment Funds Regulations 2012 and are subject to the supervision of India’s capital markets authority. This makes NIIF unique compared with other government-sponsored SIFs, which, as mentioned previously, either are created by SIFspecific legislation or may be formed under company law. Because SIFs are akin to private capital funds, mixed capital SIFs typically draw a clear distinction between the legal identity of the fund and its manager. The separate legal identity of the manager can also reinforce its operational independence from the public sponsor. Private capital funds, like other investment funds, are distinguished from other types of companies by their unique organizational structure that distinguishes between the entity holding the assets
TABLE 3.4
SIFs formed entirely under commercial law
SIF
OWNERSHIP
SOURCE LAW / REGULATIONS FOR FUND(S)
SOURCE LAW / REGULATIONS FOR MANAGER
Asia Climate Partners
Mixed capital
Exempted Limited Partnership Law (2018 Revision)
Hong Kong’s Companies Ordinance (Cap. 622) (2014)
Marguerite II
Mixed capital
Luxembourg’s Law of August 10, 1915, on commercial companies (Company Law)
European Union Alternative Investment Fund Management Directive, licensed under Luxembourg law (Marguerite Investment Management)
National Infrastructure Investment Funds (India)
Mixed capital
Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, and Indian Trusts Act, 1882
Company Law, 2013 (NIIF Ltd)
Khazanah Nasional Berhad (Malaysia)
Public capital
Malaysia’s Companies Act 1965
n.a.a
Mubadala Investment Company (United Arab Emirates)
Public capital
United Arab Emirates Federal Law No. 2 of 2015 on Commercial Companies
n.a.b
Palestine Investment Fund (West Bank and Gaza)
Public capital
Companies Law No. 12 of 1964
n.a.c
Source: World Bank. Note: n.a. = not applicable; SIF = strategic investment fund. a. Because Khazanah is an investment company, the regulation for management entity is not relevant. Khazanah’s activities in the financial markets (for example, the sale of listed shares in its portfolio companies and related disclosure requirements) must comply with applicable securities law, but the vehicle itself does not fall under fund regulation. b. No separate management entity. c. No separate management entity.
