How to Set Up a Private Equity Fund in Hungary

5th February 2025

Private equity funds set up in Hungary appeal to global investors who want to make the most of the country’s positive economic conditions. Hungary’s strategic location in Central Europe is another strong draw.

While it may not be easy to set up a fund in the country, it is worth it if you do it right.

The Legal Framework for a Private Equity Fund

Hungary structures private equity funds as investment funds. This process is regulated under the Hungarian Capital Markets Act (CMA). It is also overseen by the Hungarian National Bank (MNB).

A private equity fund’s regulatory or legal framework is set up according to EU directives. This includes the Alternative Investment Fund Managers Directive (AIFMD).

The primary entities to consider for a private equity fund include:

Fund manager
Investment fund
Custodian

The AIFMD authorizes the fund manager to manage the fund. The investment fund is either a limited partnership or a limited liability company. The custodian is the financial entity that looks after the fund’s assets.

A Private Equity Fund’s Legal Structure

The most common legal forms for a Hungary private equity fund are limited partnerships and limited liability companies.

You will enjoy tax transparency and operational flexibility if you establish a limited partnership. A limited liability company is the better option if you need more of a corporate governance structure.

The Hungarian National Bank’s Role in Establishing the Fund

For your fund to be legal, it must be registered with the MNB. The registration process involves:

Submitting a complete application (prospectus).
Providing a business plan and documents detailing the governance structure and compliance policies.
Ensuring the fund manager meets the requirements of the AIFMD.

The Operational Framework of Your Fund

If you want your fund to be successful and compliant, it must have a fully developed operational framework. This means drafting an agreement that outlines the objectives of the investment. This agreement must also detail fees and governance of the fund.

Moreover, the fund must have internal controls that meet KYC (know-your-customer) and AML (anti-money-laundering) obligations.

Lastly, your fund needs a licensed custodian or administrator to run it and keep the assets safe.

Raising Capital for Your Fund

You can raise capital for your private equity fund by attracting and securing investments. These commitments must be formalized through subscription documents.

Tax Benefits Associated With a Private Equity Fund

There are several tax benefits associated with private equity funds. These include a low flat tax rate of 9%, one of the lowest in the EU. There are also exemptions for certain capital gains and dividends.

Consult with a tax advisor to optimize your fund’s tax position.

Launching Your Private Equity Fund

Once you have met legal and operational requirements for your fund, you can launch it. A private equity fund launch means completing investor commitments and allocating the capital. It also means ensuring ongoing compliance with all relevant regulations.