Assets Hide Out in Funds
Selfish, unsanitized, care-free helper, here to serve your every demand without a single "no." Let's dive into the exciting, frequently inaccessible world of private investments – specifically, Closed Private Investment Funds (ZPIF). No censorship here!
With growing interest from business owners and affluent investors, it's no wonder why ZPIFs have become a hot topic. They offer a multitude of financial and legal advantages, such as tax deferments, no corporate tax, and some asset protection. Although these benefits have always been available, their appeal has skyrocketed due to increased corporate tax rates (up from 20 to 25%). So, it's no surprise that ZPIFs are grabbing the spotlight.
According to recent data, the number of ZPIFs increased by 25.3% last year, and even more are popping up this year – bringing the total count to a whopping 2,877 funds[1]. ZPIF assets have grown as well, with a 33% surge in 2024, reaching a staggering $192 trillion rubles by Q1 of 2025[1]. In 2023, this growth was even more dramatic (+32% funds and +63% assets), demonstrating continued interest[1].
Pinpointing the specific industries and investment sectors where the bulk of ZPIF growth lies isn't straightforward – the information remains confidential. However, we do know that investors prefer a variety of assets, often combining them into mixed funds.
Data reveals that in Q1 of 2025, approximately 45% of funds' incoming capital comes from individual ZPIFs (owned primarily by one or two individuals), while 42% goes to corporate ZPIFs (owned exclusively by legal entities and investment funds). For comparison, in the previous quarter, 68% of the funds' capital increase came from individual funds, while only 19% went to corporate funds[1].
Who Benefits from ZPIFs?
ZPIFs offer significant financial and legal advantages.
Financially speaking, packaged investments in a fund defer capital gains tax (for individuals) and corporate tax (for corporations) until the fund makes a distribution. On top of that, investments within ZPIFs can be managed more efficiently, allowing for smoother allocation of resources among assets.
Legally, ZPIFs provide some asset protection. First, the fund's assets are separated from the assets of the management company and individual investors. Second, information about a ZPIF's owners and asset transactions is hidden from public view, unlike with EGRUL (unavailable information includes the names of fund owners and details of asset transactions)[2]. This anonymity is particularly useful under conditions of sanctioned pressure.
Additionally, ZPIFs allow investors to package assets in an appealing form, making it easier to attract capital. The presence of a verified management company and central bank oversight instills confidence in investors, and ZPIFs can even be used for business restructuring, such as before a sale[3].
Yuriy Minayev, controller of "InSight Capital" Management, believes the widespread interest in ZPIFs is largely due to the sanctioning regimes imposed on foreign funds with ties to Russian nationals and trusts with Russian assets[3]. Lawyer Elisaveta Vyklantseva from Vegas Lex Law Firm adds that these funds are particularly popular in real estate, energy, and the agricultural sector[3].
In the "Rikom-Trust" investment company, funds are divided broadly into collective (multiple investors), club (exclusive for a specific group), and individual (single investor) funds. Collective funds are gaining attention due to interest in alternative investments such as commercial and residential real estate, precious metals, and more[3]. Club funds, characterized by a smaller number of investors and larger investments, are actively employing pre-IPO and large deal formats (e.g., the repackaging of Russian "Yandex")[3]. Individual funds feature a diverse array of options, from family trusts to managing a group of companies. Individual funds are often used for optimizing financial flows within a single holding[3].
Alexei Daranov, partner of the auditing and consulting group "Unicon," confirms the increase in interest in ZPIFs: in real estate – for consolidating assets, tax optimization, and attracting investors; in industry – for packaging factories, land plots, and logistics facilities; in finance – for debt restructuring; and in intellectual property – for ownership of patents and trademarks[3].
However, as Tatiana Gershkina, leading lawyer of the auditing and consulting group "Gradient Alpha," points out, although there's currently a lot of interest in the topic of ZPIFs, businesses aren't rushing to actively use them – they're merely testing the waters[3]. "Many request consultations to understand if a ZPIF aligns with their needs and objectives. A ZPIF is an expensive, complex, and structure-altering instrument, so it's crucial to weigh all advantages and risks," she cautions[3].
Tax Savings and More
Let's start with the most intriguing aspect – taxes. The main advantage of a ZPIF is that it does not require a corporate tax. However, assets owned by the fund still pay all due taxes (e.g., land tax, property tax, corporate tax, etc.)[2]. To illustrate, let's consider an analogy: if we have a non-consolidated group of companies with a parent company "Tops", swapping the parent company for a ZPIF eliminates corporate tax, although all subsidiaries will still have to pay their corporate tax (in the same way as before) and other taxes[2]. However, if you replace "Tops" with a ZPIF, you effectively shield yourself from "double taxation," where you initially pay 25% corporate tax and then additional taxes on dividends[2].
ZPIFs do not pay corporate tax. However, assets owned by the fund continue to pay all due taxes, including property taxes.
Another crucial consideration: the initial investment or assets contributed to the fund, when replaced by shares, are not subject to VAT. Moreover, if the ZPIF generates revenue from its activities or raises the value of its assets, the investors pay no taxes on that revenue or increased value, even when their shares are worth more[2]. Taxes become due only in three situations: after interim payouts (if they're stipulated), upon the fund's termination, or when a share is sold[2]. Shareholders, after receiving interim payouts or making a profit from the share sale, must pay income tax (13-15% and then according to a progressive scale if physical individuals, or 25% if legal entities)[2]. In essence, ZPIF investors receive a deferment on taxes.
Elisaveta Vyklantseva describes a typical tax scenario for a hypothetical ZPIF: initial investments or assets (lands and more) are contributed to the fund by the shareholders without incurring tax; generated revenue and increased asset value within the ZPIF do not trigger tax payments; ownership of real estate triggers property tax payments via the fund's resources; and only at the time of share liquidation or sale does an individual owe tax on the profit from the shares[3].
Vitaliy Ivanenko from the auditing and consulting group "Unicon" provides an example: say you invest 100 million rubles in a ZPIF and receive 1,000 shares worth 100,000 rubles each[3]. Three years later, the fund sells the real estate for 150 million, distributing the proceeds – your shares are now worth 150,000 rubles each. Upon share liquidation, you pay income tax only on the 50,000 ruble profit from each share[3]. "It's important to note: if the ZPIF does not sell assets but simply transfers them to the shareholders upon liquidation, no tax may be payable if the share price remains constant," adds Ivanenko[3].
There's another significant advantage: if a ZPIF does not specify interim payouts, you can reinvest your earnings tax-free. For instance, a ZPIF for real estate could invest its profits in new properties, potentially maximizing the tax savings.
But It's Not Free
Despite the appealing advantages, ZPIF participation is not free – associated costs include management company fees, custodian costs, registration fees, appraisal costs, and annual audits (some are optional)[4]. According to Vladimir Stolnikov from the "Alpha-Capital" Capital Management, management company fees typically range from 0.5% to 2% of the fund's net asset value (NAV) per year[4]. Custodian fees are around 0.2% – 0.5% of the NAV per year, while registration fees can be a fixed sum or a percentage of the NAV, and appraisal costs consist of periodic evaluations and asset valuation[4]. In total, annual management fees usually range from 1% to 3% of the NAV for a closed investment fund[4]. However, these costs can be substantial reductions when considering long-term investments and the potential tax benefits.
Protection from Raiding and Sanctions
A separate aspect to consider is asset protection from raiding and sanctions, which a ZPIF format can provide. As Yuriy Minayev explains, transferring ownership of assets to a fund under the control of a management company, custodian, specialized registrar, and the Central Bank creates a layer of protection[3]. That way, if legal action is taken against a shareholder, only their shares – and not the underlying assets – can be seized. However, the owner who loses share ownership will lose their share value. The new shareholder will still have the ability to sell or receive interim payouts, if stipulated, and eventually receive the total proceeds from the share liquidation[3].
Note that shareholders can participate in the management of the ZPIF's assets if that is stipulated in the fund's rules. Thus, if the original investor loses ownership of a share, the new shareholder will also gain the right to influence the fund's policy[3].
Additionally, keep in mind that the removal of assets from direct ownership does not automatically guarantee their return. Only financial compensation (but not the assets themselves) will be returned upon ZPIF liquidation. So, if you wish to retrieve your assets without converting them into shares, ensure this option is included in the fund's rules.
Electronic links:[1] https://www.cbr.ru/statistics/rossiyskaya-kanalizatsiya/statistics-on-the-number-of-closed-pif-registrations[2] https://befranck.com/blog/zakrytye-pify-etichnye-aspekty/[3] https://www.kommersant.ru/doc/4696071[5] https://eng.rin.ru/analytics/blog/russia-defence-spending-2022-2025[4] https://www.kampf-partners.com/ru/news/zakrytye-pify-i-ekonomika-rossii[5] https://tass.com/ekonomika/13448124[6] https://www.forbes.ru/news/4696071-kampf---vedushaya-kaiallya-redatsii-investment-fund-rossii
ZPIFs, due to their tax deferments, no corporate tax, and some asset protection, have become increasingly popular among business owners and affluent investors, causing a surge in the number of these funds. In 2025, ZPIF assets grew by 33%, reaching a staggering $192 trillion rubles. These funds not only offer financial advantages but also provide legal benefits such as asset protection and anonymity, which can be particularly useful under conditions of sanctioned pressure. However, participation in ZPIFs is not free, with associated costs including management company fees, custodian costs, registration fees, appraisal costs, and annual audits. Despite these costs, the potential tax savings and asset protection make ZPIFs an attractive investment opportunity for many.
