Peru
An offering that exclusively targets institutional investors is considered as a private offer and the regulations established in the Securities Act (Ley del Mercado de Valores) will not be applicable.
In that scenario, securities acquired by an institutional investor cannot be transferred to third parties, unless such third party is another institutional investor or the security is previously entered in the Securities Registry conducted by the Superintendence of Securities Market (SMV).
Nevertheless, institutional investors can decide whether to register before the Securities Registry under a special regime the following issues targeted to institutional investors: (i) the ones registered as such before the SMV; (ii) the ones registered before the U.S. Securities and Exchange Commission – SEC under Rule 144A or Regulation S of the U.S. Securities Act of 1933; (iii) the registered as such before other stock exchanges member of the Latin American Integrated Market (Mercado Integrado Latinoamericano – MILA).
Are there any restrictions on establishing a fund?
Establishing a fund, offering fund securities and operating a fund, among other things, are regulated activities under the following laws:
- private pension funds – regulated under the General Act of the Financial and Insurance Systems and Internal Organization Act of the Superintendence of Banking and Insurance (Ley General del Sistema Financiero y del Sistema de Seguros y Orgánica de la Superintendencia de Banca y Seguros) and its Regulations and therefore subject to the regulations of the Superintendence of Banking, Insurance and Private Pension Fund Management Companies (SBS);
- investment funds – regulated under the Investment Funds and their Management Companies Act and its Regulation and therefore subject to the regulation of the Superintendence of Securities Market (SMV);
- mutual funds – regulated under the Securities Market Act and its Regulations and therefore subject to the regulations of the SMV; and
- collective funds – regulated under the Collective Fund Act (A las Empresas Administradoras de Fondos Colectivos contralará SMV) – Executive Order 21907 and its Regulations and therefore subject to the regulations of the SMV.
An investment fund may be established through a general regime or a simplified regime.
All funds are subject to the general regime unless offers are:
- exclusively directed to institutional investors;
- directed to investors that will pay certain minimum quotas before the funds can operate; or
- directed to the management company’s shareholders, directors and members of the ‘Investment Committee’.
The incorporation of an investment fund under the simplified regime is automatically approved upon the submission of the required documentation. On the other hand, the incorporation of a fund under the general regime is subject to the approval and authorization of the SMV.
What are common fund structures?
Common forms of private pension funds include:
- capital protection – minimum investment 100% in debt securities (maximum 100% short term and 75% long term);
- capital preservation – maximum 10% in equity securities, maximum 100% in long-term debt securities; maximum 40% in short-term debt securities and maximum 10% in derivatives;
- mixed or balanced – maximum 45% in equity securities; maximum 75% in long-term debt securities; maximum 30% in short-term debt securities and maximum 20% in derivatives; and
- capital growth – maximum 80% in equity securities, maximum 70% in long-term debt securities, maximum 30% in short-term debt securities and maximum 30% in derivatives.
Common forms of investment fund include:
- investments in any kind of securities, deposits, participation certificates on mutual funds, properties, leasing over properties, factoring and bills discounting;
- open-ended and closed-ended funds;
- retail and non-retail funds (including mixed investment funds);
- Undertakings for Collective Investments in Transferrable Securities (UCITS) and non-UCITS funds; and
- qualified investor structures that invest in, for example, corporate shares or bonds, real property, commodities (for example, precious metals) and derivatives.
Common forms of mutual funds include:
- debt securities mutual funds – 100% in debt securities minimum, sub-classified in very short term, short term, middle term and long term;
- moderate mixed mutual funds – 75% in debt securities minimum and 25% equity maximum;
- balanced mixed mutual funds – 50% in debt securities and 25% in equity securities as minimum investment;
- growing mixed mutual funds – 25% in debt securities and 50% in equity securities as minimum investment;
- equity mutual fund – 75% in equity as minimum investment;
- partial secured mutual fund – 75% of its capital is secured;
- fixed income secured mutual fund – 100% of its capital is secured and a minimum income;
- secured mutual fund – 100% of its capital is secured;
- structured mutual fund;
- international mutual fund – 51% in overseas securities;
- mutual fund of mutual funds – 75% in other mutual funds; and
- flexible mutual fund – any other criteria than above.
Common forms collective funds include different groups for purchasing:
- properties and mortgage payments;
- cars and trucks;
- machinery and equipment;
- motorcycles, moto-taxi and household appliances; and
- educational services.
What are the differences between offering fund securities to professional / institutional or other investors?
For investment funds, the main difference is that if the fund’s securities will be exclusively offered to institutional investors, the registration procedure of the funds will be conducted through the simplified regime. In that sense, the management company will not be obliged to present an advance copy of the agreement to be executed with its clients (which is needed for funds incorporated under the general regime) or require to register in advance the information regarding the invstment fund and its issue.
Are there any other notable risks or issues around establishing and investing in funds?
Establishing funds
There are no specific risks to reference here other than those referred to in Establishing and investing in debt and hedge funds – establishment.
Are there any restrictions on marketing a fund?
No, there are no limits or restriction on marketing a fund, except for common law principles applicable to all services and products that are offered in the market. The marketing must be done directly by the Fund Management Company or an authorized promotor (such as a brokerage firm representative).
Are there any restrictions on managing a fund?
The Superintendence of Securities Market (SMV) is responsible for regulating and supervising funds. Fund managers, individuals and legal entities are prohibited from carrying on regulated activities, such as fund management, without authorization.
The SMV authorizes the organization and operation of a fund management company as a corporation (sociedad anónima) and supervises it as long as its purpose is to manage investment funds, mutual funds and collective funds. The Superintendence of Banking, Insurance and Private Pension Fund Management Companies (SBS) authorizes the organization and operation of private pension funds.
All fund management companies need an authorization except for investment fund management companies whose funds only issue trust certificates not to be placed through public offerings, which are not supervised by the SMV, being obliged to inform such condition to their investors and clients.
The capital of management companies is prescribed by law and varies for:
- private pension fund management companies;
- investment fund management companies and mutual fund management companies; and
- collective fund management companies.
Additionally, the net equity of any management company must be at least than 0.75% of the sum of mutual fund and investment fund equities under its administration.
Management companies must obtain a business license either from the SMV or the SBS. The conditions applicable to the establishment of a management company remain throughout the company’s existence.
Management companies are required to grant certain guarantees on behalf of the SMV in order to guarantee the compliance of the obligations assumed before their investors.
Are there any restrictions on entering into derivatives contracts?
There are no restrictions on entering into derivatives contracts as all of them are executed on an 'over-the-counter' (OTC) basis, which means that contracts are negotiated and agreed between private parties without being regulated.
Without prejudice to the foregoing, the Superintendence of Banking, Insurance and Private Pension Fund Management Companies (SBS) establishes a limited amount of operations related to derivative contracts for financial entities in relation to their equity in order to regulate their total exposure and guarantee a diversified investment portfolio.
What are common types of derivatives?
Derivative contracts are executed in Peru for a range of reasons including hedging, trading and speculation.
All of the main types of derivative contracts are widely used in Peru:
- forwards;
- futures;
- swaps (such as interest rate or currency swaps); and
- options (call options and put options).
The value of the derivative contracts is based on the value of the underlying assets.
The main classes of underlying assets seen in Peru are:
- equity;
- fixed income instruments;
- commodities;
- foreign exchange; and
- credit events.
Are there any other notable risks or issues around entering into derivatives contracts?
Considering that the market for derivative contracts in Peru is limited and that there is no regulation applicable to that type of operation, no notable risks are apparent other than the limitations established by the Superintendence of Banking, Insurance and Private Pension Fund Management Companies (SBS) in relation to the level of exposure from authorized financial companies.
Ricardo Escobar
Partner
DLA Piper Peru
[email protected]
T +1 511 616 1200
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