{"id":113070,"date":"2025-09-11T09:26:37","date_gmt":"2025-09-11T09:26:37","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=113070"},"modified":"2025-09-11T09:26:37","modified_gmt":"2025-09-11T09:26:37","slug":"kuwait-alternative-investment-funds","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/kuwait-alternative-investment-funds\/","title":{"rendered":"Kuwait: Alternative Investment Funds"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-113070","comparative_guide","type-comparative_guide","status-publish","hentry","guides-alternative-investment-funds","jurisdictions-kuwait"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Al-Hossam Legal<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2025\/09\/Hossam-Logo.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Al-Hossam Legal<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2025\/09\/Hossam-Logo.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Alternative Investment Funds laws and regulations applicable in Kuwait<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the principal legal structures used for Alternative Investment Funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Kuwait, Alternative Investment Funds are referred to as Collective Investment Schemes and are primarily regulated under Law No. 7 of 2010, as amended (\u201c<strong>CMA Law<\/strong>\u201d) regarding the Establishment of the Capital Markets Authority (\u201c<strong>CMA<\/strong>\u201d) and Regulating Securities Activities and its Executive Bylaws No. 72 of 2015, as amended (\u201c<strong>CMA Bylaws<\/strong>\u201d).<\/p>\n<p>The CMA is the regulatory authority for establishing, licensing and regulating funds.<\/p>\n<p>Kuwait\u2019s investment landscape has evolved rapidly since the CMA, and its Bylaws came into force. Today, Alternative Investment Funds (AIFs), covering private equity, venture capital, hedge strategies, and specialized real estate vehicles, play an increasingly important role in capital formation and diversification.<\/p>\n<p>At the heart of Kuwait\u2019s regulatory framework, Module Thirteen (Collective Investment Schemes) of the CMA Bylaws sets out the permitted structures and governance rules for AIFs.<\/p>\n<p><strong><em>Two Principal Structures<\/em><\/strong><\/p>\n<p>1. Corporate Funds<\/p>\n<ul style=\"padding-left: 0\">\n<li>Legal form: AIFs may be established as a corporate fund entity, acquiring separate legal personality once registered with the CMA.<\/li>\n<li>Fund types: Open-ended or closed-ended. Alternative strategies, such as private equity, venture capital, hedge funds, REITs, and sustainable funds, are expressly recognized.<\/li>\n<li>Governance: Managed by a licensed Fund Manager and overseen by an Executive Committee, with mandatory service providers (Custodian, Investment Controller, Auditor, and if Islamic, Sharia auditors).<\/li>\n<li>When used: Corporate funds are chosen where scale, liability separation, and visibility are essential, particularly when seeking listing on Boursa Kuwait.<\/li>\n<\/ul>\n<p>2. Contractual Collective Investment Schemes (CCIS)<\/p>\n<ul style=\"padding-left: 0\">\n<li>Legal form: Not a separate legal entity; established through a contract between the manager and investors. Units are issued via a CMA-licensed SPV.<\/li>\n<li>Investor base: Strictly limited to Professional Clients, with a cap of 25 investors (exceptions apply for inheritance\/court orders).<\/li>\n<li>Governance: Same service provider requirements as corporate funds, but with greater flexibility. The manager\u2019s executive team is personally liable for negligence or misconduct.<\/li>\n<li>When used: CCIS structures are preferred for private equity, venture capital, hedge, and bespoke alternative strategies requiring flexibility in terms such as capital calls, carried interest, or co-investments.<\/li>\n<\/ul>\n<p>Spotlight on Key AIF Types<\/p>\n<ul style=\"padding-left: 0\">\n<li>Private Equity &amp; Venture Capital Funds: Typically closed-ended. Venture Capital Funds must be corporate, while Private Equity Funds may adopt either structure.<\/li>\n<li>Hedge Funds: Generally corporate, with heightened disclosure and risk management requirements.<\/li>\n<li>Real Estate Funds &amp; REITs: Often corporate; REITs are subject to additional Boursa Kuwait rules.<\/li>\n<li>Sustainable\/ESG Funds: Recognized by Module Thirteen, aligning with global responsible investment trends.<\/li>\n<\/ul>\n<p>Corporate vs. Contractual \u2014 Choosing the Right Path<\/p>\n<p>The decision between a corporate fund and a contractual CIS depends on:<\/p>\n<ul style=\"padding-left: 0\">\n<li>Investor profile (broad base vs. professional clients only).<\/li>\n<li>Capital-raising ambitions (public listing vs. private placement).<\/li>\n<li>Flexibility needs (standard governance vs. bespoke terms).<\/li>\n<\/ul>\n<p>Kuwait\u2019s dual-track system, allowing AIFs to be structured as either corporate entities or contractual schemes, provides fund sponsors and investors with valuable flexibility. Corporate funds cater to scale and public visibility, while contractual schemes serve the bespoke needs of professional investors.<\/p>\n<p>This balance positions Kuwait to remain regionally competitive, offering structures that accommodate both institutional capital and innovative alternative strategies in line with international best practice.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does a structure provide limited liability to the investors? If so, how is this achieved?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Investors in AIFs benefit from limited liability to the value of their participation in the capital (Article 2.4.1 of Module 13 of the CMA Bylaws).<\/p>\n<p>Foreign funds licensed by the CMA for marketing in Kuwait are governed by the law of the foreign fund\u2019s domicile and typically, the investors\u2019 liability is limited to the commitment or subscription amount in the AIF. The CMA ensures investors are adequately protected before approving marketing the AIFs in Kuwait.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a market preference and\/or most preferred structure? Does it depend on asset class or investment strategy?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is a preference to corporate structure for the domestic AIF as opposed to contractual fund structure. Corporate fund structure offers more advantages that are more appealing to investors as follows:<\/p>\n<table style=\"font-size: 10px\" border=\"1\">\n<thead>\n<tr>\n<td><strong>Feature<\/strong><\/td>\n<td><strong>Corporate Fund<\/strong><\/td>\n<td><strong>Contractual CIS (via SPV)<\/strong><\/td>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Legal status<\/td>\n<td>Separate legal entity<\/td>\n<td>Contractual, no legal entity<\/td>\n<\/tr>\n<tr>\n<td>Investor scope<\/td>\n<td>Public\/professional (depending on fund)<\/td>\n<td>Professional Clients, \u226425 investors<\/td>\n<\/tr>\n<tr>\n<td>Governance<\/td>\n<td>Formal Articles of Association<\/td>\n<td>Contract-based, flexible terms<\/td>\n<\/tr>\n<tr>\n<td>Typical AIF strategies<\/td>\n<td>REITs, large PE, listed funds<\/td>\n<td>PE, VC, hedge funds, bespoke deals<\/td>\n<\/tr>\n<tr>\n<td>Listing<\/td>\n<td>Permitted on Boursa Kuwait<\/td>\n<td>Not applicable<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the regulatory regime distinguish between open-ended and closed-ended Alternative Investment Funds (or otherwise differentiate between different types of funds or strategies (e.g. private equity vs. hedge)) and, if so, how?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The CMA Bylaws recognizes both open-ended funds and close-ended funds and specifies that a fund shall take either the form of an open-ended fund or close-ended fund (Article 2.2 of Module 13 of the CMA Bylaws). Module 1 of the CMA Bylaws defines open-ended fund as a fund of a variable capital, with a capital that increases with the issuance of new investment units or decreases with the redemption of any of its units during the period specified in its articles. Close-ended fund is defined as a fund of limited capital. Its units can only be redeemed at the expiry of the term of the fund. Its capital may be increased or decreased in accordance with its articles of association.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any limits on the manager\u2019s ability to restrict redemptions? What factors determine the degree of liquidity that a manager offers investors of an Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Article 1.4 of the CMA Bylaws entitles participants in AIFs to redeem their units from an AIF in accordance with the Articles of Association or Contract. Article 90 of the CMA Law and 1.13 of Module 13 of the CMA Bylaws states that the CMA, where a manager or investment controller or custodian of an AIF has failed to comply with the provisions of the CMA Law or CMA Bylaws, may instruct the fund manager to temporarily suspend issuance or redemption operations in the units of the AIF, or both from the date specified in the instructions therewith.<\/p>\n<p>The degree of liquidity that investors in an AIF can expect is determined primarily by (i) the fund structure (open-ended funds are required to permit periodic redemptions, while AIFs investing in illiquid asset classes are structured as closed-ended and do not offer interim redemptions, (ii) the nature of the underlying assets (i.e., liquid securities can support frequent dealings, whereas illiquid holdings necessitate long lock-ups, and (iii) the terms disclosed in the prospectus and Articles (i.e., define the redemption framework and are viewed by the CMA before approval).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are potential tools that a manager may use to manage illiquidity risks regarding the portfolio of its Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Kuwait, the management of illiquidity risk in an AIF is addressed through the CMA Law and Module 13 of the CMA Bylaws, which requires that liquidity terms be set out in the AIF\u2019s Articles of Association and prospectus, subject to CMA approval. With regards to illiquidity strategies, the CMA Law and CMA Bylaws require a close-ended structure, meaning that no interim redemptions occur until liquidation of asset(s). For open-ended funds, managers may manage liquidity through notice periods, lock-ups, redemption gates, in-kind redemptions, or suspension of dealing, provided these tools are disclosed and approved, with suspension permitted only in exceptional cases and subject to CMA oversight (Article 1.13 of Module 13 of the CMA Bylaws).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions on transfers of investors\u2019 interests?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Transfers of fund units are subject to the CMA regime and the fund\u2019s Articles. For public funds, transfers follow the Boursa Kuwait rulebook (Article 2.23 of Module 13 of the CMA Bylaws). For private funds, Article 2.8.1 of Module 13 of the CMA Bylaws provides that participation is limited to Professional Clients (as defined in the answer to question 29 below) throughout the life of the fund, meaning units may not be transferred to non-professional investors except in limited cases (i.e., inheritance or court order). Accordingly, while units can be transferred, they must be recorded in the unitholders\u2019 register maintained with the Kuwait Clearing Agency and any transfer that results in a breach of the professional investor restriction may be refused.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any other limitations on a manager\u2019s ability to manage its funds (e.g., diversification requirements)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Under Articles 2.30, 2.31 and Appendix 4 of Module 13 of the CMA Bylaws, managers are subject to diversification requirements, investment concentration caps, borrowing limits, and fund-specific investment controls, meaning their discretion to manage fund assets is significantly constrained by law.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the local tax treatment of (a) resident, (b) non-resident, (c) pension fund and (d) sovereign wealth fund investors (or any other common investor type) in Alternative Investment Funds? Does the tax status or preference of investors or the tax treatment of the target investments primarily dictate the structure of the Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no income tax applicable to individual investors in Kuwait (including Kuwaiti or foreign investors). Kuwaiti corporates entities are not taxable merely for being investors in AIFs.<\/p>\n<p>Any Kuwaiti closed joint stock company pays out of its net profit Zakat tax at the rate of 1% and contribute 1% to KFAS (The Kuwait Foundation for the Advancement of Sciences (KFAS).<\/p>\n<p>Companies listed in Boursa Kuwait are required to pay the National Labour Support Tax of 2.5% of the company\u2019s net annual profits.<\/p>\n<p>Non-resident entities are subject to 15% tax on its Kuwait source net profit.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rights do investors typically have and what restrictions are investors typically subject to with respect to the management or operations of the Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Investors in AIFs have rights to information (Article 2.10 of Module 13 of the CMA Bylaws), reporting (Article 2.32 to 2.34 of Module 13 of the CMA Bylaws), participation in unitholder assemblies (Article 2.35 of Module 13 of the CMA Bylaws), pre-emptive rights in certain cases (Article 3.37 of Module 13 of the CMA Bylaws), and liquidation proceeds. However, they are restricted from day-to-day management (Article 2.14 of Module 13 of the CMA Bylaws), face transfer limitations (in private funds, where only professional clients may hold units ), and may only exercise influence through assembly votes on limited strategic matters. The fund manager retains exclusive responsibility for management under Module 13 of the CMA Bylaws.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Where customization of Alternative Investment Funds is required by investors, what types of legal structures are most commonly used?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Where customization is required, the Kuwaiti market often relies on offshore fund structures which allows flexible governance and investor-specific arrangements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are managers or advisers to Alternative Investment Funds required to be licensed, authorised or regulated by a regulatory body?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, managers and advisers of AIFs in Kuwait are required to be licensed and regulated by the CMA. Article 2.14 of Module 13 of the CMA Bylaws requires that fund managers be an entity licensed by the CMA to practice fund management. Article 1.6 require that the advisor engaged by the fund be licensed by the CMA. Note that the CMA maintains a register of licensed entities, and only these may act as fund managers, investment advisers, or custodians for a Kuwaiti fund.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are Alternative Investment Funds themselves required to be licensed, authorised or regulated by a regulatory body?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, AIFs in Kuwait must be licensed and regulated by the CMA. Establishing, marketing or managing a fund without a CMA license is prohibited under CMA Law and CMA Bylaws.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the Alternative Investment Fund require a manager or advisor to be domiciled in the same jurisdiction as the Alternative Investment Fund itself?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>If the AIF is domiciled in Kuwait, it must appoint a Kuwait domiciled, CMA licensed manager (Article 2.14 of Module 13 of the CMA Bylaws). If the AIF is domiciled offshore Kuwait, its manager and\/or advisor may be foreign, provided it is properly regulated in its jurisdiction and the fund obtains CMA marketing license in Kuwait.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there local residence or other local qualification or substance requirements for the Alternative Investment Fund and\/or the manager and\/or the advisor to the fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A Kuwait domiciled AIF must have a local CMA license, a local CMA licensed manager and locally licensed service providers (custodian, controller auditor). Fund managers must maintain real presence in Kuwait through incorporation, office, and staff. Advisors must also be CMA licensed unless acting as sub-advisors to a local manager. For AIFs incorporated offshore Kuwait, the AIF itself and its manager\/advisor may remain abroad, but the CMA approval and a local licensed placement agent are required.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What service providers are required by applicable law and regulation?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Kuwaiti AIFs must have a CMA licensed manager, investment controller, custodian and external auditor (Articles 2.14 to 2.18 of Module 13 of the CMA Bylaws).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are local resident directors \/ trustees required?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The CMA Law and CMA Bylaws do not impose a blanket requirement for local resident directors or trustees in AIFs. Instead, it mandates that the fund\u2019s key service providers (manager, custodian, investment controller and auditor) be locally licensed by the CMA and domiciled in Kuwait, which provides the necessary local substance and oversight.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rules apply to foreign managers or advisers wishing to manage, advise, or otherwise operate funds domiciled in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Foreign managers or advisors cannot directly manage or advise a Kuwait domiciled fund unless they obtain a CMA license. A foreign adviser may only act as a sub-advisor, with a CMA licensed local manager retaining responsibility. All core service providers must be locally licensed. For foreign domiciled funds marketed in Kuwait, foreign managers and advisers may operate under their home license, provided the fund has the proper CMA marketing License to market in Kuwait.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the common enforcement risks that managers face with respect to the management of their Alternative Investment Funds?\u00a0<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The main enforcement risks for AIFs managers in Kuwait are licensing violations (Articles 126 to 128 of the CMA Law), breaches of investment\/diversification limits (Article 2.31.3 of Module 13 of the CMA Bylaws), conflicts of interest (Article 2.31.1 of Module 13 of the CMA Bylaws), disclosure\/reporting failures (Articles 2.32 to 2.34 of Module 13 of the CMA Bylaws), mishandling of redemptions (Article 1.13 of Module 13 of the CMA Bylaws), inadequate oversight of service providers (Article 1.13 of Module 13 of the CMA Bylaws), and marketing\/placement breaches (Article 2.7, 2.8 and 5 of Module 13 of the CMA Bylaws).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the typical level of management fee paid? Does it vary by asset type?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no statutory cap in Kuwait, but typical management fees range from 0.5% to 1.5% of net asset value for traditional liquid funds, 1.5% to 2% of commitments for private equity and venture capital, 1% to 1.5% of net asset value for real estate, and around 2% of net asset value for hedge funds. The level does vary by assets and fund strategy.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is a performance fee or carried interest typical? If so, does it commonly include a \u201chigh water mark\u201d, \u201churdle\u201d, \u201cwater-fall\u201d, \u201cpreferred return\u201d or other condition? If so, please explain.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Performance fees and carried interest are typical for Kuwaiti AIFs. Hedge funds generally apply a performance fee with high-water mark and sometimes a hurdle rate, while private equity, venture capital and real estate funds apply carried interest via a distribution waterfall with a preferred return. All such arrangements must be clearly disclosed in the fund\u2019s prospectus under Module 13 of the CMA Bylaws.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are fee discounts \/ fee rebates or other economic benefits for initial investors typical in raising assets for new fund launches?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, fee discounts, rebates, or other incentives for initial investors are not uncommon in Kuwaiti AIF launches, particularly for anchor investors, though not required by law. AIFs are required to treat all unitholders of the same category equally. The key legal condition is that any such preferential arrangements must be clearly disclosed in the fund\u2019s prospectus and Articles, ensuring transparency and fairness (Module 13 of the CMA Bylaws).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are management fee \u201cbreak-points\u201d offered based on investment size?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Fee break-points linked to investment size are typical in Kuwaiti AIFs, particularly for large institutional investors, but they must be expressly disclosed in the prospectus and Articles to ensure transparency and fairness (Module 13 of the CMA Bylaws).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are first loss programs used as a source of capital (i.e., a managed account into which the manager contributes approximately 10-20% of the account balance and the remainder is furnished by the investor)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>First loss programs are not typical or expressly recognized under the CMA framework for AIFs. While managers may co-invest alongside investors, usually through a standard commitment (not less than 5%), a structured first loss program would be unusual in Kuwait and would likely require CMA approval or be implemented via an offshore structure instead of a locally domiciled fund.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the typical terms of a seeding \/ acceleration program?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A seeding\/acceleration program in Kuwait, when structured under Module Thirteen as a Venture Capital Fund, typically combines closed-ended fund terms, professional client participation, and high flexibility to invest in startups and early-stage companies, while maintaining CMA-mandated safeguards such as due diligence, valuation standards, and conflict-of-interest controls.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What industry trends have recently developed regarding management fees and incentive\/performance fees or carried interest? In particular, are there industry norms between primary funds and secondary funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Kuwait, management and performance fee structures for AIFs are broadly aligned with global practice. Primary funds typically charge 2% management fee and 20% carry, while secondary funds now trend lower, at 1% management and 10-15% carry, reflecting reduced deployment and risk. The prevailing trend is fee compression and stronger investor protections, driven by institutional investors demanding lower costs and tighter alignment.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What restrictions are there on marketing Alternative Investment Funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>CMA approval is required for both public offerings and private placements. Public funds can be offered to all investors if it is approved by the CMA, Private AIFs may only be marketed to professional clients (Article 2.8.1 of Module 13 of the CMA Bylaws). Units of a fund established outside Kuwait may not be marketed in Kuwait without a CMA license (Article 1.15 of Module 13 of the CMA Bylaws). In practice, foreign AIFs must appoint a CMA licensed distributor to conduct private marketing in Kuwait. All marketing material must be pre-approved by the CMA and must comply with fair disclosure standards.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the concept of \u201cpre-marketing\u201d (or equivalent) recognised in your jurisdiction? If so, how has it been defined (by law and\/or practice)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Kuwaiti law does not formally recognise pre-marketing. Any investor approach that includes fund specific discussion or offering materials is treated as marketing and requires a CMA approval\/license. In practice, it is possible to hold generic discussions with limited investors, but no specific material can circulate without triggering the CMA licensing requirements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can Alternative Investment Funds be marketed to retail investors?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>AIFs in Kuwait may not be marketed to retail investors. Only CMA licensed public funds can be offered to the retail market. Private funds, including AIFs, are restricted to Professional Clients only. Professional Clients can be defined as follows: A professional investor by nature (i.e., any government, governmental institution, central bank or international institution; a Kuwaiti CMA licensed person or a regulated financial institution in Kuwait or outside of Kuwait; or a company with a paid up capital of KWD 1,000,000 (approx.. USD 3.3 million)) or a professional investor by qualification (i.e., a person who trades in securities in large volumes and on average that is no less than KWD 250,000 (approx.. USD 825,000) in each quarter for the past two years; an investor whose assets and funds with a Kuwaiti CMA licensed person is no less that KWD 100,000 (approx.. USD 330,000); or an investor who is working or had previously worked in the financial sector for at least one year in a position which requires knowledge of the services provided and transactions.).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does your jurisdiction have a particular form of Alternative Investment Fund be that can be marketed to retail investors (e.g. a Long-Term Investment Fund or Non-UCITS Retail Scheme)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Kuwait does not have a special retail AIF category. Only public funds can be marketed to retail investors, and these are typically traditional UCITS style products. All alternative\/illiquid funds are restricted to Professional Clients only.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the minimum investor qualification requirements for an Alternative Investment Fund? Does this vary by asset class (e.g. hedge vs. private equity)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>See answer to question 29 above on the definition of Professional Clients.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there additional restrictions on marketing to government entities or similar investors (e.g. sovereign wealth funds) or pension funds or insurance company investors?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Kuwaiti law does not impose additional CMA restrictions on marketing AIFs to sovereign wealth funds, government entities, pension funds, or insurance companies. These institutions are treated as Professional Clients under the CMA Bylaws and can participate in private placements.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions on the use of intermediaries to assist in the fundraising process?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Intermediaries may be used in the fundraising process, but they must be licensed by the CMA to conduct securities promotion\/placement. Fundraising through unlicensed intermediaries is prohibited. For foreign AIFs, the appointment of a CMA licensed local distributor is mandatory.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the use of \u201cside letters\u201d restricted?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The use of side letters in not expressly prohibited under the CMA Law and CMA Bylaws but their use is restricted by disclosure and fairness requirements. Any preferential terms must be consistent with the prospectus and Articles of Association, and cannot mislead or disadvantage other investors. In practice, side letters are common in private AIFs with Professional Clients.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any disclosure requirements with respect to side letters?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Any preferential terms agreed through side letters must be consistent with and disclosed in the fund\u2019s prospectus and Articles of Association (Articles 2.6 and 2.10 of Module 13 of the CMA Bylaws). While side letters are permitted for Professional Clients, managers must disclose either the terms themselves or at least the possibility of such preferential arrangements, to satisfy the CMA\u2019s general transparency and fair treatment obligations.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the most common side letter terms? What industry trends have recently developed regarding side letter terms?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>In Kuwait, the most common side letter terms relate to fee reductions, liquidity enhancements, governance rights, enhanced reporting and regulatory or tax compliance. Recent trends show increasing demand for MNF protections, stronger liquidity rights, and governance oversight, alongside fee compression for large anchor investors. Managers have also become more careful to disclose the possibility of side letters in the prospectus to remain compliant with the CMA Bylaws.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">3872<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/113070","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=113070"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}