Glossary

Under the Alternative Investment Fund Managers Directive (AIFMD), an AIF is defined as any collective investment undertaking - including investment compartments thereof - which raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and which is not authorised as a UCITS. This broad definition encompasses hedge funds, private equity funds, real estate funds, infrastructure funds, and other non-UCITS vehicles.

The legal person whose regular business is managing one or more Alternative Investment Funds (AIFs). The AIFMD establishes harmonised rules governing the authorisation, operation, transparency, and supervision of AIFMs within the European Union. An authorised AIFM benefits from the EU marketing passport, enabling cross-border distribution of AIFs to professional investors across all EU member states.

Anti-Money Laundering refers to the set of laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income. The FATF (Financial Action Task Force) Recommendations form the international standard for AML/CFT measures, requiring financial institutions to implement customer due diligence, transaction monitoring, suspicious activity reporting, and record-keeping obligations. AML compliance is a non-negotiable requirement for all regulated fund structures.

A beneficial owner is the natural person who ultimately owns or controls a legal entity or arrangement, or on whose behalf a transaction is being conducted. FATF Recommendation 24 requires countries to ensure that competent authorities can obtain adequate, accurate, and current information on the beneficial ownership of legal persons. In fund structuring, identifying beneficial owners is a core AML/KYC obligation - every investor, every layer, every nominee arrangement must be traced back to the natural person.

The Bermuda Monetary Authority is the integrated regulator of the financial services sector in Bermuda, responsible for supervision of banks, trust companies, investment businesses, investment funds, fund administrators, money service businesses, corporate service providers, and insurance companies. The BMA also issues Bermuda's national currency and manages exchange control policies. Bermuda is a well-established jurisdiction for investment fund domiciliation, particularly for hedge funds and reinsurance-linked vehicles.

A Central Bank Digital Currency is a digital form of central bank money - a direct liability of the central bank - that could be used for retail or wholesale payments. Per the BIS: 'a purely digital banknote.' Unlike commercial bank deposits, CBDCs carry no credit risk as they are backed directly by the central bank. As of 2025, over 130 countries representing 98% of global GDP are exploring CBDCs, with several in pilot or production phases.

The Cayman Islands Monetary Authority is the regulatory body responsible for the supervision and regulation of financial services in the Cayman Islands. CIMA oversees banks, insurance companies, investment funds, securities, fiduciary services, and money services businesses. The Cayman Islands remain one of the world's leading domiciles for investment funds, with over 12,000 registered funds under CIMA supervision.

A Credit Linked Note is a structured financial instrument that combines a traditional bond with embedded credit risk exposure. The issuer transfers credit risk of a reference entity, portfolio, or index to the investor. CLNs are typically issued by banks or special purpose vehicles (SPVs) and offer enhanced yield in exchange for assuming credit risk. In Switzerland, CLNs can be issued with a Swiss ISIN as a tradable, custody-ready security - making them particularly useful for private credit originators who want to securitise loan portfolios without establishing a full fund structure.

The Commission de Surveillance du Secteur Financier is Luxembourg's financial regulatory authority, responsible for the prudential supervision of the financial sector. The CSSF supervises credit institutions, investment firms, pension funds, SICAVs, SICAFs, AIFMs, management companies, and other financial professionals. Luxembourg is the largest fund domicile in Europe and the second-largest globally after the United States, with over EUR 5 trillion in assets under management.

Custody refers to the safekeeping and administration of financial assets on behalf of investors or fund structures. A custodian holds securities and other assets in electronic or physical form, settles trades, collects income, and provides reporting. Under AIFMD, AIFs must appoint an independent depositary (custodian) to safeguard assets and oversee fund operations. Custody is a critical component of institutional fund infrastructure - without it, assets cannot be held in a regulated, auditable manner.

DeFi (Decentralised Finance) refers to financial services built on distributed ledger technology that operate without traditional intermediaries. DeFi protocols enable lending, borrowing, trading, and asset management through smart contracts on public blockchains. While DeFi offers transparency, composability, and 24/7 operation, institutional adoption requires bridging the gap between DeFi's technical capabilities and TradFi's regulatory and governance standards.

Distributed Ledger Technology refers to the technological infrastructure and protocols that allow simultaneous access, validation, and record updating across a network spread over multiple entities or locations. Unlike traditional centralised databases, DLT does not require a central authority or intermediary to process, validate, or authenticate transactions. Blockchain is the most widely known form of DLT, but the term encompasses a broader range of distributed database architectures.

Enhanced Due Diligence is the additional verification and monitoring measures applied to higher-risk clients, transactions, or business relationships under AML/CFT regulations. EDD goes beyond standard KYC by requiring deeper investigation into the source of wealth, source of funds, purpose of the business relationship, and ongoing transaction monitoring. EDD is mandatory for politically exposed persons (PEPs), clients from high-risk jurisdictions, and complex or unusual transaction patterns.

ERC-6909 is an Ethereum token standard for multi-token contracts that enables a single smart contract to manage multiple fungible token types. Unlike ERC-20 (one token per contract) or ERC-1155 (mixed fungible and non-fungible), ERC-6909 is optimised for scenarios where multiple fungible token classes need to coexist under unified governance - such as multiple share classes within a single fund structure. It reduces gas costs and simplifies compliance logic compared to deploying separate contracts per share class.

The Ethereum Virtual Machine is the runtime environment for smart contracts on the Ethereum blockchain and EVM-compatible networks. It provides a standardised execution layer where smart contracts (self-executing programs) run identically across all nodes in the network. EVM compatibility has become the de facto standard for enterprise blockchain deployments, enabling interoperability across multiple chains including Ethereum, Polygon, Avalanche, and Arbitrum.

The Financial Action Task Force is the global money laundering and terrorist financing watchdog. Established in 1989 by the G7, FATF sets international standards (the 40 Recommendations) that aim to prevent money laundering, terrorist financing, and the financing of proliferation of weapons of mass destruction. FATF's mutual evaluation process assesses countries' compliance with these standards and their effectiveness in combating financial crime.

The Swiss Financial Services Act (Finanzdienstleistungsgesetz/FIDLEG), effective since January 2020, regulates the provision of financial services and the offering of financial instruments in Switzerland. It establishes conduct rules for financial service providers, including suitability and appropriateness requirements, transparency obligations, and client classification (retail, professional, institutional). Financial advisors must register with a supervisory organisation and meet ongoing education requirements.

The Financial Services Commission of the British Virgin Islands is the regulatory authority responsible for the regulation, supervision, and inspection of all financial services in the BVI. The BVI is one of the world's leading jurisdictions for the incorporation of investment funds and holding companies, with a well-established legal framework based on English common law. BVI funds benefit from tax neutrality, flexible structuring options, and efficient regulatory processes.

The Financial Services Commission of Mauritius is the integrated regulator for the non-banking financial services sector and global business in Mauritius. Mauritius is a gateway for investment into Africa and Asia, with an extensive network of double taxation avoidance agreements (DTAAs) and investment promotion and protection agreements (IPPAs). The FSC licenses and supervises Global Business Companies, CIS Managers, investment advisers, and fund administrators.

Fund administration encompasses the operational and back-office functions required to run an investment fund, including NAV calculation, investor onboarding, subscription and redemption processing, regulatory reporting, financial statement preparation, and transfer agency services. Fund administrators act as independent third parties, providing oversight and verification that protects both fund managers and investors. The quality of fund administration directly impacts audit outcomes, investor confidence, and regulatory standing.

Know Your Customer is the process of verifying the identity of clients and assessing their risk profile as part of anti-money laundering (AML) and counter-terrorist financing (CFT) obligations. KYC procedures include collecting and verifying identity documents, understanding the nature of the client's business, assessing the source of funds, and conducting ongoing monitoring. Required by financial institutions under FATF standards and local regulations in every jurisdiction where HCP operates.

The Limited Qualified Investor Fund is a new Swiss fund category introduced on 1 March 2024 under the revised Collective Investment Schemes Act (CISA). L-QIFs are open exclusively to qualified investors and do not require FINMA approval before launch - only notification. This significantly reduces time-to-market compared to traditional Swiss fund structures. L-QIFs can be structured as contractual funds, SICAVs, or limited partnerships, and can invest in all asset classes including alternative investments.

A Management Company (ManCo) is a regulated entity authorised to manage collective investment schemes. In the EU context, a ManCo can be a UCITS management company (under the UCITS Directive) or an AIFM (under AIFMD). The ManCo is responsible for portfolio management, risk management, administration, and marketing of the fund. Third-party or 'rented' ManCo arrangements allow fund managers to launch regulated vehicles without establishing their own management company - reducing cost, time, and regulatory burden.

The Monetary Authority of Singapore is Singapore's central bank and integrated financial regulator. MAS oversees all financial institutions in Singapore, including banks, insurers, capital market intermediaries, financial advisers, and payment service providers. Singapore is a leading Asian fund domicile with a well-established regulatory framework, extensive double tax treaty network, and the Variable Capital Company (VCC) structure designed specifically for investment funds.

The Markets in Crypto-Assets Regulation is the EU's unified regulatory framework for crypto-assets, adopted in 2023 and entering full application in December 2024. MiCA establishes uniform rules for the issuance, offering, and trading of crypto-assets across all EU member states, including stablecoins (asset-referenced tokens and e-money tokens). It introduces licensing requirements for crypto-asset service providers (CASPs) and sets prudential, conduct, and transparency standards.

Net Asset Value is the value of a fund's total assets minus its total liabilities, divided by the number of outstanding units or shares. Per the CSSF: 'the net asset value as calculated regularly in accordance with the rules set out in the law, the constitutive documents and/or the prospectus.' NAV is the primary metric for pricing fund units and is typically calculated daily, weekly, or monthly depending on the fund type and liquidity profile.

The measurable efficiency gains that come from fixing how a fund actually runs - not from picking better trades. Investment alpha gets competed away. Operational alpha doesn't. Kill the manual processes, consolidate the fragmented systems, encode the controls. The savings compound. HCP coined the term to describe what happens when infrastructure stops being a cost centre and starts generating returns.

A paying agent is a financial institution appointed to make interest and principal payments to holders of securities on behalf of the issuer. In fund and securitisation structures, the paying agent handles distribution of dividends, coupon payments, and redemption proceeds. The paying agent also typically handles tax withholding obligations and provides payment confirmations to investors and custodians.

A Politically Exposed Person is an individual who holds or has held a prominent public function, including heads of state, senior politicians, senior government officials, judicial or military officials, senior executives of state-owned enterprises, and important political party officials. FATF standards require financial institutions to apply enhanced due diligence (EDD) to PEPs and their family members and close associates due to the higher risk of corruption and money laundering associated with their positions.

Under the Swiss Financial Services Act (FinSA/FIDLEG), client advisors who provide financial services to clients in Switzerland must register with a supervisory organisation recognised by FINMA. Registration requires proof of adequate education, professional indemnity insurance, and affiliation with an ombudsman's office. Registered client advisors are subject to ongoing supervision and must comply with conduct rules including suitability assessment, transparency, and documentation obligations.

The Société en Commandite Spéciale is the French-language designation for the Luxembourg Special Limited Partnership (SLP). The SCSp is governed by the Law of 12 July 2013 and is functionally identical to the SLP. It has no legal personality, is tax-transparent, and operates through a limited partnership agreement. The terms SCSp and SLP are used interchangeably in Luxembourg fund practice.

Securitisation is the financial process of pooling various types of contractual debt or assets and selling consolidated claims against those pools as securities to investors. The process transforms illiquid assets (loans, receivables, real estate) into tradeable instruments. In Luxembourg, the Securitisation Law of 22 March 2004 provides a flexible framework for securitisation vehicles, allowing them to issue securities backed by virtually any type of asset or risk.

A security token is a digital representation of a security (equity, debt, or other financial instrument) recorded on a distributed ledger. Security tokens are subject to securities regulation in the jurisdiction of issuance and must comply with applicable securities laws including registration, disclosure, and investor protection requirements. They combine the programmability of blockchain with the legal protections of regulated securities.

Settlement finality is the legal guarantee that once a transfer order enters a designated payment or securities settlement system, it cannot be unwound - even in the event of a participant's insolvency. Established by the EU Settlement Finality Directive (98/26/EC) adopted in May 1998, this principle reduces systemic risk in payment and securities settlement systems by ensuring that completed transactions are irrevocable and legally binding.

A Luxembourg Special Limited Partnership governed by the Law of 12 July 2013, modelled on Anglo-Saxon limited partnerships. The SLP has no legal personality, is tax-transparent, and consists of one or more general partners (with unlimited and joint liability) and limited partners (whose liability is limited to their contributions). It is established through a limited partnership agreement (LPA) and does not require notarial intervention. The SLP is the preferred vehicle for international fund managers due to its contractual flexibility, tax transparency, and alignment with Anglo-Saxon limited partnership conventions.

A smart contract is a self-executing program stored on a blockchain that automatically enforces the terms of an agreement when predefined conditions are met. Smart contracts eliminate the need for intermediaries in certain processes by encoding business logic directly into code. In fund infrastructure, smart contracts can automate NAV calculations, fee extractions, compliance checks, share class equalisation, and investor onboarding workflows.

A Special Purpose Vehicle is a legal entity created for a specific, limited purpose - typically to isolate financial risk. SPVs are commonly used in securitisation, structured finance, and fund structuring to ring-fence assets and liabilities from the parent entity. In fund infrastructure, SPVs serve as issuance vehicles for CLNs, holding companies for co-investments, and feeder structures for cross-border distribution.

A stablecoin is a type of digital asset designed to maintain a stable value relative to a reference asset, typically a fiat currency such as USD or EUR. Stablecoins serve as a bridge between traditional and digital financial systems, enabling settlement, payments, and treasury management in digital asset markets. Major stablecoins include USDC, USDT, and EURC. As of 2025, the total stablecoin market capitalisation exceeds $150 billion.

Tokenization is the process of creating a digital representation of a tangible or intangible asset using distributed ledger technology (DLT). Per IOSCO: 'the process of digitally representing an asset, or ownership of an asset.' Per the SEC (January 2026): 'the process of creating a digital representation of a tangible or intangible asset using DLT.' Tokenization enables fractional ownership, 24/7 transferability, programmable compliance, and automated settlement of financial instruments.

TradFi (Traditional Finance) refers to the established financial system including banks, broker-dealers, asset managers, custodians, clearing houses, and regulated exchanges that have operated under existing regulatory frameworks for decades. In the context of institutional fund infrastructure, TradFi encompasses conventional fund administration, manual NAV calculation, paper-based subscription processes, and legacy settlement systems (typically T+2 or T+3).

A transfer agent maintains the register of shareholders or unitholders of a fund, processes subscription and redemption orders, and manages the issuance and cancellation of fund units or shares. The transfer agent is responsible for investor record-keeping, AML/KYC documentation, distribution of investor communications, and coordination with the fund administrator for NAV-based pricing of transactions.

UCITS is the EU regulatory framework for retail investment funds, established by Directive 2009/65/EC. UCITS funds benefit from a European passport allowing distribution to retail investors across all EU member states with a single authorisation. UCITS funds must comply with strict investment restrictions, diversification rules, liquidity requirements, and investor protection standards. Luxembourg and Ireland are the dominant UCITS domiciles, collectively hosting over 80% of European UCITS assets.

The Variable Capital Company is a corporate structure introduced by Singapore in January 2020, specifically designed for investment funds. A VCC can be set up as a standalone fund or as an umbrella structure with multiple sub-funds, each with segregated assets and liabilities. VCCs offer flexibility in capital structure (variable capital), privacy (shareholder register not publicly available), and tax efficiency. The VCC framework positions Singapore as a competitive Asian alternative to Luxembourg and Cayman fund domiciles.