Private Investment Funds as Related Parties: Transfer Pricing Lessons from Hungarian Case Law

Investment funds are passive pools of investments that do not engage in business activities and whose operations are managed by a separate legal entity, the fund manager. Private investment funds have a definite set of investors that may belong to the same group. This chapter analyses, through three Hungarian court decisions, whether a private investment fund can be a related party to the other group members of the majority owner, and whether two business entities in the same group can be related through a private investment fund. The same is even more complex in an international context, as differences in the legal characterization of investment funds may lead to asymmetric outcomes, with only one state recognizing the existence of an associated enterprise relationship.