How Ukraine's New Investment Fund Law Could Open the Door to Business Investment

Ukraine is preparing to reform its investment fund market in line with European standards. Draft Law No. 16137 aims to expand opportunities for private investors and establish new mechanisms for financing businesses, real estate, and infrastructure. What will change if the legislation is adopted, and could Ukrainians' savings become a source of capital for economic reconstruction?

Ukrainians are becoming increasingly active investors, but the range of available investment instruments remains limited. Government bonds have become a mainstream investment product, while corporate bonds, equities, and investment funds have yet to achieve comparable popularity.

According to the National Bank of Ukraine's depository, as of November 1, 2026, Ukrainian individuals held UAH 173.1 billion in domestic government bonds (OVDPs). Their holdings increased by approximately UAH 5.6 billion in October alone.

Meanwhile, Ukraine's collective investment industry remains unevenly developed. More than 2,100 collective investment institutions are registered in the country, but almost 98% of their assets are concentrated in venture capital funds, most of which are not designed for mass-market retail investors.

Draft Law No. 16137, "On Investment Funds," is intended to address this imbalance by introducing European asset management models.

On November 4, 2026, the Verkhovna Rada Committee on Finance, Taxation and Customs Policy recommended that the bill be adopted at its first reading.

If implemented, the reform could create new opportunities for investing in diversified securities portfolios, private companies, venture capital projects, real estate, and infrastructure.

However, the central question is not simply whether new financial instruments will emerge, but whether they can channel private savings into financing the real economy.

Ukrainians Hold UAH 173 Billion in Government Bonds: Why Investment Options Remain Limited

Investment behavior among Ukrainians has changed considerably in recent years.

Traditionally, most private savings were concentrated in bank deposits, foreign currency cash, and real estate. Today, government bonds are increasingly used to preserve capital and generate investment income.

Several factors have contributed to the popularity of domestic government bonds, including the relatively high yields on hryvnia-denominated issues, favorable tax treatment for individual investors, government repayment guarantees, and simplified access through banks, brokers, and the Diia application.

According to Ukraine's National Securities and Stock Market Commission (NSSMC), 153,500 new securities accounts were opened for individuals between January and July 2026. This figure represents the number of newly opened accounts, not necessarily the number of unique new investors.

Nevertheless, trading activity in Ukraine's securities market remains highly concentrated.

According to figures cited by Forbes Ukraine, during January–August 2026:

• 80% of securities trading volume was attributable to domestic government bonds, totaling approximately UAH 1.4 trillion;

• 1.8% was attributable to investment certificates;

• 1.2% was attributable to corporate bonds.

These figures demonstrate the substantial dominance of government debt instruments over other segments of the organized capital market.

For Ukraine's economy, this structure has mixed implications.

On the one hand, domestic government bonds remain an important source of financing for the state budget and defense expenditures. On the other hand, private companies have significantly fewer opportunities to raise capital directly through securities markets.

As a result, industrial enterprises, property developers, infrastructure operators, and technology companies largely depend on bank loans, internally generated capital, international institutional financing, or individual private investors.

A more developed investment fund market could provide an additional financing channel for these businesses.

Ukraine's Investment Fund Paradox: More Than 2,100 Funds, but Little Retail Investment

At first glance, Ukraine already has a relatively large investment fund industry.

According to the Ukrainian Association of Investment Business (UAIB), more than 2,100 collective investment institutions were registered in Ukraine at the beginning of November 2026, alongside 264 asset management companies.

Total assets under management by these companies reached approximately UAH 791.2 billion as of August 31, 2026, including collective investment institutions, non-state pension funds, and relevant insurance assets.

However, a closer examination of the figures reveals a substantial structural imbalance.

Structure of Ukraine's Investment Fund Market

According to UAIB reporting data as of August 31, 2026:

The table includes funds for which reporting data are available through asset management companies. Consequently, the number differs from the total number of registered collective investment institutions.

Venture capital funds therefore account for approximately 97.9% of the assets held by Ukrainian collective investment institutions, while open-end funds represent just around 0.03%.

This is one of the most striking structural imbalances in Ukraine's investment market.

Importantly, a Ukrainian venture capital fund is not necessarily a vehicle for financing technology startups in the conventional international sense.

Many such structures are used to manage corporate assets, investment projects, real estate, and the capital of business groups. Although they can perform important functions, most are not broadly accessible investment products for households.

By contrast, the open-end fund segment, through which private investors can access professionally managed portfolios, remains extremely small.

This imbalance is one of the principal reasons why reform is needed.

What Draft Law No. 16137 on Investment Funds Would Change

On October 12, 2026, Draft Law No. 16137, "On Investment Funds," was registered in the Verkhovna Rada.

The legislation was developed with the participation of the National Securities and Stock Market Commission, with support from the World Bank and taking into account comments from the European Commission.

The bill aims to modernize the legal framework for collective investment, which is still largely based on legislation adopted in 2012.

Its central objective is to move toward a European-style system that distinguishes investment funds by their strategies, risk profiles, target investors, and management requirements.

Public Investment Funds: UCITS

UCITS (Undertakings for Collective Investment in Transferable Securities) is a widely used European framework for collective investment in liquid financial instruments.

These funds are designed, among other purposes, for retail investors and are subject to standardized requirements for diversification, liquidity, disclosure, and risk management.

A UCITS fund can build a portfolio consisting of government bonds, corporate bonds, equities, and other eligible financial instruments.

For individual investors, this could provide an opportunity to acquire an interest in a diversified investment portfolio without independently selecting dozens of securities.

However, professional asset management does not guarantee investment returns or the preservation of the original investment.

Alternative Investment Funds: AIFs

The second category comprises alternative investment funds, which are regulated under the European Alternative Investment Fund Managers Directive (AIFMD).

These structures may employ a broader range of investment strategies, including investments in private companies, real estate, infrastructure, and other assets.

They are particularly relevant to high-net-worth private investors, investment firms, property developers, and specialized asset managers.

Access by retail investors to specific alternative investment funds would nevertheless depend on applicable regulations, the type of fund, and restrictions governing the distribution of its investment products.

Specialized Funds Under European Regulations

Another component of the proposed reform involves the development of specialized collective investment structures.

European Venture Capital Funds (EuVECA) could help channel capital into young innovative businesses and promising startups.

European Social Entrepreneurship Funds (EuSEF) focus on businesses pursuing social objectives, including inclusive employment, social services, and community development.

European Long-Term Investment Funds (ELTIFs) are designed to invest in long-term assets and projects, including infrastructure and private businesses.

The latter could be particularly significant for Ukraine given the substantial financing required for reconstruction and economic modernization.

At the same time, it is essential to distinguish liquid public investment funds from vehicles investing in long-term, illiquid assets. In the latter case, investors may face substantial restrictions on early redemptions.

Why the European Investment Fund Model Matters for Ukraine

Europe has one of the largest investment fund markets in the world.

According to the European Commission, the combined net assets of EU investment funds amounted to approximately €20.5 trillion in 2024, with more than 65,000 funds operating across the bloc.

Through these structures, households, pension investors, and institutional market participants gain access to a broad range of financial assets.

Introducing similar rules could offer Ukraine several potential advantages.

First, international investors would find it easier to evaluate Ukrainian funds operating under familiar principles of governance and disclosure.

Second, Ukrainian asset management companies could develop investment products aligned with international standards.

Third, legislative harmonization could facilitate Ukraine's gradual integration into the EU's capital market ecosystem.

However, the immediate implications should not be overstated.

The introduction of European standards would not automatically grant Ukrainian investment funds the right to distribute their products freely across all EU member states.

Cross-border access to the European market would still require compliance with the relevant regulatory requirements and procedures.

Investment Funds and Ukraine's Reconstruction: Where Could Private Capital Flow?

The greatest economic potential of the reform lies in creating additional financing channels for businesses.

Given limited access to bank lending for long-term investment projects and significant wartime risks, alternative capital sources could become increasingly important for certain sectors of the Ukrainian economy.

Manufacturing and Industrial Enterprises

Specialized funds could finance the acquisition of industrial companies, expansion of production capacity, modernization of equipment, or implementation of new investment projects.

For example, an investment fund could acquire a stake in a profitable manufacturing company and provide capital for its further development.

Another model involves acquiring several companies within the same industry, consolidating their operations, improving operational efficiency, and subsequently selling the combined business to a strategic investor.

This is the domain of private equity and industrial M&A, which remains relatively underdeveloped in Ukraine compared with Western European markets.

Commercial Real Estate

Investment funds could serve as vehicles for raising capital to acquire and develop income-generating real estate, including office buildings, retail properties, warehouses, logistics complexes, and industrial facilities.

Ukraine already has some experience with collective investment in real estate.

For example, according to UAIB's August 2026 review, the INZHUR REIT fund recorded approximately UAH 133 million in net capital inflows through an additional placement of investment certificates.

This demonstrates that interest in collective investment in real assets is already emerging within the existing legislative framework.

Energy and Infrastructure

Funds focused on long-term investment projects could be particularly relevant for Ukraine.

Potential financing areas include:

• construction of new energy generation capacity, particularly distributed generation facilities;

• development of energy storage systems;

• modernization of logistics terminals and industrial infrastructure;

• investment in transportation and municipal infrastructure;

• financing industrial real estate and manufacturing parks.

Such projects typically require substantial capital expenditures and have long payback periods.

As a result, their financing is generally better suited to long-term investment fund strategies than to traditional open-end funds subject to strict liquidity requirements.

Venture Capital and Technology Companies

The reform could also create new opportunities for Ukraine's technology sector.

European-style investment funds could establish additional channels for financing Ukrainian startups, technology companies, innovative equipment manufacturers, and selected segments of the dual-use technology industry.

For investors, such vehicles provide a means of building a portfolio of promising businesses instead of committing all available capital to a single startup.

However, venture capital remains a high-risk investment category, and capital recovery typically depends on successful exits through the sale of company stakes or other liquidity events.

Could Ukrainian Investors Redirect Some of Their Government Bond Holdings into Businesses?

The current volume of household investment in government bonds provides an indication of the potential scale of new investment products.

Suppose that, over time, just 1% of individuals' existing domestic government bond holdings were redirected into alternative financial instruments.

Based on a total portfolio of UAH 173.1 billion, this would represent approximately UAH 1.73 billion.

If the share reached 5%, the amount would rise to approximately UAH 8.66 billion.

This is not a forecast of a shift in savings allocation, but rather an illustrative calculation demonstrating the potential scale of domestic private investment capital.

Of course, not all of these funds could or should be redirected toward corporate investments.

Government bonds remain an important financial instrument for both the state budget and individual investors. Furthermore, investment funds themselves may allocate part of their portfolios to government securities.

Consequently, the establishment of new investment funds would not automatically increase financing for private businesses.

The determining factor will be whether a sufficient number of high-quality investment products emerge that can channel capital into corporate bonds, equities, private companies, and long-term investment projects.

Investment Accounts and Tax Incentives: Another Component of the Reform

The development of investment funds is being considered alongside other legislative initiatives aimed at modernizing Ukraine's capital markets.

One of these initiatives is Draft Law No. 15314 on Individual Investment Accounts.

The proposed framework would introduce a dedicated investment account through which individuals could invest in eligible financial instruments.

Under the proposed model, investment income could qualify for tax exemption if investments are held for at least three years and other applicable conditions are met.

This could potentially reduce the tax advantage that domestic government bonds currently enjoy over certain other financial instruments.

However, the bill has not yet become law, and the specific tax provisions may change during parliamentary consideration.

Another important reform is Ukraine's Law "On Securitization and Covered Bonds," No. 4985-IX, adopted on September 16, 2026.

It is scheduled to enter into force on July 1, 2027.

Securitization makes it possible to issue securities backed by specified financial assets, including cash flows from loans and other receivables.

This creates additional instruments for financing the economy and could broaden the range of financial assets available to institutional investors.

Together with investment fund reform, these changes could become components of Ukraine's new financial market infrastructure.

New Money Market Funds: An Alternative to Bank Deposits?

Another area under discussion as part of the reform is the introduction of money market funds.

According to NSSMC Chairman Oleksii Semeniuk, the relevant provisions are expected to be developed in cooperation with the World Bank ahead of the bill's second reading.

Money market funds typically invest in short-term, liquid financial instruments.

Their potential advantage for investors is the opportunity to earn returns from a relatively conservative, professionally managed securities portfolio.

However, such funds should not be equated with bank deposits.

An investment fund does not guarantee a fixed return, and the value of its assets may fluctuate. Bank deposit guarantee mechanisms do not automatically apply to investment fund certificates.

The development of money market funds will therefore require not only an appropriate legal framework but also robust rules governing liquidity management, disclosure, and risk control.

Investor Protection: Who Will Safeguard Investors' Money?

One of the key principles of the European model is the separation of asset management and asset custody functions.

An asset management company makes investment decisions in accordance with a fund's established strategy.

An independent depositary or custodian performs the legally prescribed functions of safekeeping assets, monitoring transactions, and overseeing compliance with applicable rules.

This arrangement is intended to limit opportunities for the improper use of fund assets and improve operational transparency.

Nevertheless, even effective regulatory supervision cannot eliminate market risks.

Securities prices may decline, issuers may default on their obligations, and investments in private companies or real estate may remain illiquid for extended periods.

For the development of a broad retail investment market, other equally important factors include transparent management fees, reliable asset valuations, high-quality audits, and the ability of investors to understand the actual risks of a product before committing capital.

What Could Hold Back Investment Fund Development Even After the Law Is Adopted?

A European-style legislative framework would provide an important foundation, but it would not, by itself, guarantee the emergence of a liquid and competitive market.

Ukraine continues to face several structural challenges.

Limited availability of liquid corporate instruments. Ukraine's market offers relatively few equities and corporate bonds suitable for building large, diversified investment portfolios.

Wartime risks. Damage to assets, logistics disruptions, energy constraints, and uncertainty can significantly affect investment valuations.

Limited liquidity. Exiting investments in private companies, certain real estate assets, and infrastructure projects may take many years.

Management costs. Smaller funds may face relatively high expenses for administration, auditing, depositary services, and professional asset management.

Market confidence. Investors need evidence that capital protection, disclosure requirements, and the accountability of professional market participants will operate effectively in practice, rather than merely exist on paper.

Unless these issues are addressed, the new legal structures may remain instruments used primarily by a limited group of professional investors.

When Will Ukraine's New Investment Fund Law Take Effect?

As of November 5, 2026, Draft Law No. 16137 remains under parliamentary consideration.

On November 4, the relevant parliamentary committee recommended that the Verkhovna Rada adopt the bill in principle at its first reading.

This means the reform has passed an important preparatory milestone, but the legislation has not yet been enacted.

Additional provisions may be introduced ahead of the second reading, including measures concerning money market funds.

Furthermore, according to published opinions on the draft legislation, the Ministry of Finance considers that the document requires further revision, while the Ministry of Digital Transformation has submitted comments and proposals.

Once the law is finally adopted, time will be required to develop secondary regulations, enable asset management companies to adapt, and prepare the necessary market infrastructure.

Therefore, a potential expansion in the range of investment products available in 2027 should be viewed as an anticipated direction of market development rather than a guaranteed launch date for every new category of investment fund.

Conclusions: Could Investment Funds Become a New Source of Capital for Ukraine?

Ukraine's investment market is gradually evolving.

With individuals holding more than UAH 173 billion in domestic government bonds, the country has already demonstrated substantial demand for financial investment instruments.

However, the structure of the market remains highly uneven. Government bonds dominate securities trading, while open-end investment funds manage only a very small share of total assets within the collective investment industry.

Draft Law No. 16137 aims to establish the legal foundation for developing European-style investment funds, expanding investment strategies, and channeling capital into businesses.

For individual investors, this could mean a wider choice of financial instruments and greater access to professional asset management.

For businesses, it could create additional financing opportunities through corporate securities, private investment funds, and long-term investment vehicles.

For the economy as a whole, it could support the gradual development of a domestic capital market that is less dependent on bank lending.

However, the reform's real impact will depend less on the number of new funds established than on their ability to attract investors, ensure transparency and professional management, and finance economically viable projects.

Ukraine's central challenge is not simply to establish more investment funds, but to transform domestic savings into long-term capital for business development, infrastructure investment, and the country's reconstruction.