ALTERNATIVE INVESTMENT FUNDS AND THEIR ROLE IN PORTFOLIO COMPANIES - STATE OF ART IN CROATIAN LAW AND PRACTICE

Alternative investment funds (AIFs) differ from "traditional" investors in their role as shareholders of companies in which they invest. Although traditional institutional investors prevail over alternative ones in the global share of investments, their role in portfolio companies is usually passive due to regulatory and investment restrictions applicable to them (as for example UCITS funds). Specific types of AIFs (private equity/venture capital funds/hedge funds) invest a significant part of their asset in various companies and available comparative data suggests that they are significantly more active in portfolio companies than other shareholders/investors. Through different types of activism, AIFs tend to influence the corporate governance of companies in which they invest. The goal of this article is to determine whether Croatian AIFs play an active role as shareholders in their portfolio companies. Importantly, Croatian AIFs have just recently been regulated in line with known global trends, which further enhance their position on the market. Authors shall analyze available legal mechanisms for shareholders to actively participate and influence the corporate governance of the companies under Croatian law. In order to de termine whether AIFs as shareholders employ those mechanisms in practice, authors conducted research among the managers of Croatian AIFs. Research was focused on determining whether Croatian AIFs participate actively in governance of portfolio companies through voting rights, making shareholder proposals, informal influence on the board members or other type of shareholders' activism. Finally, authors shall elaborate if the current state of AIFs activism in portfolio companies represents a good example of corporate governance from the point of a long-term criticized passive shareholders issue.