Answer ... Alternative investment funds (AIFs) account for a relatively small part of the financial market in Croatia, but they are undeniably growing in presence and importance. According to information published by the Croatian Financial Services Supervisory Agency, as at the end of June 2019 there were 36 AIFs, with a net asset value of €0.5 billion. Although undertakings for collective investment in transferable securities still account for the majority of net asset value (€2.7 billion at the end of June 2019), AIFs are becoming increasingly active and popular, and are expanding their presence on the Croatian financial market.

This trend has been enhanced by the growing presence and increased activity of prominent EU funding frameworks and programmes, such as European structural and investment funds and the Investment Plan for Europe, together with increased local activity of the Croatian Bank for Reconstruction and Development.

The availability of European capital is a sign that the Croatian AIF market is maturing. This is expected to enhance investor confidence in the financial markets and the overall business environment, and more generally to result in a more sophisticated investment environment in Croatia.

Answer ... The Act transposing Directive 2011/61/EU and its implementing and delegated regulation, as well as Regulation 345/2013 regulating venture capital funds and Regulation 346/2013 regulating social entrepreneurship funds, was enacted in 2018 and was subsequently revised with changes which entered into force on 24 December 2019. The act envisages the adoption of a number of subordinate provisions, some of which were enacted in 2019; the rest are expected to be drafted during 2020. Since these subordinate provisions will elaborate on specific provisions of the AIF Act in greater detail, they will have an impact on the incorporation and operation of AIFs and AIF managers.

Answer ... Several initiatives have been launched under the EU funding framework. The most prominent include:

• the Croatian Venture Capital Initiative, established in June 2018, under which funds will invest €42 million in various small and medium-sized enterprises (SMEs), ranging from early stage to growth stage start-ups; and
• the Croatian Growth Investment Programme, launched in January 2019, which provides support to SMEs and affords them access to growth and expansion equity capital.

Most recently, Croatia’s first social impact investment fund has attracted attention from the European Investment Fund, which plans to contribute over €15 million of a total €30 million to be invested in Croatian and Slovenian SMEs that are committed to having an environmental and social impact. Social impact investing has only recently begun to gain traction, but market developments suggest that there is now a global movement towards more responsible investing. It is expected that once the first movers have overturned the misconception that impact investing is not a profitable investment, other players on the financial market will take steps in the same direction.

Most recent moves in the investment sector reflect the growing presence and popularity of AIFs – especially private equity and venture capital funds, which are becoming ever more active and attracting more and more capital. It is anticipated that this growth will only continue in the years to come.