Alternative Funds 2026 Comparisons

The Single Fund Law (LUF) (Law No 20,712) primarily allows for the structuring of public investment funds ‒ both redeemable and non-redeemable ‒ which are supervised by the Comisión para el Mercado Financiero (Financial Market Commission, or CMF) and suitable for raising funds on a broad scale; private investment funds (FIPs), which are passive vehicles intended for a limited number of participants without a public offering; and other investment fund structures.

For private equity, private debt, real estate, infrastructure, forestry, and agriculture, the most commonly used structures are non-redeemable public investment funds and FIPs, depending on the investor’s profile and distribution strategy.

There is currently a bill to reform the capital markets, which seeks to expand the range of eligible investment vehicles and assets.

The bill includes startups, growth companies, public and private debt instruments, and certain foreign assets registered and traded in Chile, including exchange-traded funds (ETFs), and proposes modifying the reinvestment rules among certain funds.

It also creates a simplified registry to expand the private debt market to medium-sized companies and reduces the 2/3 quorum required for mergers, spin-offs and amendments to articles of incorporation.

The basic rule is the transparency of the vehicle: the fund is not subject to First-Category Tax (Article 81 of the Fiscal Union Law), so it operates as a transparent vehicle and the income is attributed to the participants.

In general, in Chile, the alternative assets in which investors most frequently invest are real estate, venture capital, private debt and crypto-assets. In terms of the Chilean structure, a local evergreen fund is typically set up as a non-redeemable (public) investment fund, but with periodic liquidity mechanisms incorporated into its internal regulations, often as a feeder fund to an international evergreen master fund.

The term “hybrid” in the Chilean market usually refers precisely to this combination: a closed-end structure (to hold illiquid assets) with evergreen-style liquidity windows, or structures that combine a drawdown tranche for committed capital with a perpetual tranche. That said, the bulk of the local alternative investment industry has historically consisted of closed-end drawdown funds; the evergreen segment is the one experiencing growth, though its share of the overall market remains well below international benchmarks.

Public Investment Funds

The by-laws must include the investment and diversification policy (by issuer, business group and asset class), which the CMF formally reviews upon filing. Overlaying these requirements are the legal limits and prohibitions set out in the LUF: rules governing transactions with related parties and conflicts of interest, limits on the fund’s indebtedness, and specific prohibitions. The most relevant for alternative funds is Article 57, which prohibits the fund from engaging in operational activities, particularly real estate activities, defined as the purchase, sale, rental, leasing, remodelling, construction, and development of real estate (which is why real estate investments are structured through underlying entities). When investments exceed the applicable limits, there are typically deadlines for rectification set out in the fund’s own regulations.

FIP (Private Investment Funds)

The CMF does not require diversification or approve the investment policy, because the FIP does not make a public offering and is not regulated in the same way as public funds. The key restriction remains the passive nature of the vehicle under Article 57 (it cannot engage in operational activities). To maintain transparency and avoid being taxed as a corporation, the FIP must have a minimum of eight investors, with a cap of 20% per investor (except for institutional investors, who may hold at least 50%).

Timeframes

Fund

Immediate

Public funds are not approved on a case-by-case basis: they are established by filing their internal regulations with the Public Registry of Internal Regulations maintained by the CMF. Once the filing is complete, the fund is authorised to operate. The FIP is not required to be filed.

Fund manager

To file its first set of regulations, the fund manager must obtain authorisation to operate and authorisation to commence operations.

Public Investment Fund

Internal regulations

General Rule No 365 (Norma de Carácter General No 365, or “NCG No 365”) of the CMF specifies what the internal regulations must include, the procedure for filing them with the Public Registry of Internal Regulations, and the minimum information that must be provided to investors at the time of investment. It contains, among other things, the fund’s identification, the investment and diversification policy, the manager’s compensation, the expenses charged to the fund, and the terms and conditions for subscribing to and redeeming shares.

General fund agreement

A general contractual framework governs the relationship between the manager and the unitholders.

Prospectus

This must be provided to the unitholder and must contain, in a concise manner and in non-technical language, the essential characteristics of the fund to enable the unitholder to make an informed decision.

Disclosure of Information

Once operational, the public fund is subject to ongoing reporting to the CMF through the Fund Information System Manual (MSI), regulated by NCG No 532.

The MSI defines seven regulatory files, FONDOS01 through FONDOS07, covering the investment portfolio, derivatives portfolio, expenses and compensation (actual and disaggregated), shareholdings, material events, valuations and cash flows, and capital reductions in the case of non-redeemable funds. NCG No 532 also requires reporting the collateral provided by each fund within ten business days and attaching, each time internal regulations are filed or amended, a document listing their key variables.

In addition, there are material events: the management company must disclose any event that a “reasonable person” would consider important for their investment decisions, in accordance with the criteria set forth in NCG No 30.

In Chile, alternative funds (public investment funds, or FIPs, under Law No 20,712) operate as transparent vehicles; the fund does not pay First-Category Tax on income from its investments (Article 81 of the LUF), and the tax is passed onto the investor, who is taxed only upon distribution or redemption, as if it were a dividend from a resident corporation. Residents are subject to Global Complementary Tax (IGC) or First-Category Income Tax (IDPC), with the corresponding credit for IDPC under the Tax Credit Attribution System (SAC), while non-residents are subject to the 35% Additional Tax (AT), withheld by the General Fund Administrator(Administradora General de Fondos or AGF) and subject to double taxation treaties, unless it is a public fund with at least 80% invested in certain foreign assets and subject to mandatory distributions, in which case non-residents are subject to a flat tax of 10% (a benefit that does not apply to FIPs). At the fund level, the following rules apply: the flat tax under Article 21 on disallowed expenses, the minimum distribution of net realised income by public funds, and the VAT exemption for management (Article 83); upon the sale of shares, a 10% flat tax applies to shares traded on the stock exchange (FIP shares are excluded). The main structural risk is that the FIP will lose its transparency and be taxed as a corporation if it fails to meet the requirement of having at least eight investors, each with a maximum stake of 20%.

Chilean funds may invest in credit (consumer, mortgage, factoring and corporate) and extend it: purchasing pre-originated portfolios is the standard approach, while direct origination requires compliance with the fund’s status as an investment vehicle, particularly in the case of FIPs, where Article 57 prohibits engaging in an operational activity, so large-scale origination typically relies on an external originator. It is sufficient for the investment policy in the internal regulations to provide for this activity; the fund does not require a special licence, and lending with its own funds is not a licensed activity. However, anyone who extends credit on a large scale above certain thresholds (100,000 Unidad de Fomento (UF) or 1,000 transactions per year, under Law No 18,010) is subject to supervision and reporting requirements imposed by the CMF. The key special rules are the Maximum Conventional Rate under Law No 18,010 (a hard interest rate cap that is critical for consumer credit), consumer protection requirements under Law No 19,496/SERNAC, the regime governing the assignment of loans and invoices under Law No 19,983, the safekeeping of securities in accordance with CMF regulations, and valuation under International Financial Reporting Standards (IFRS), including IFRS 9.

The LUF does not contain an exhaustive list of eligible assets. The fund may invest in any type of instrument, contract, or asset, provided it complies with the policies set forth in its by-laws (Article 56). Funds targeting qualified investors may also invest in assets that do not meet the CMF’s requirements, provided that their by-laws provide for such investments and define how they are to be valued. The restriction, which also applies to private investment funds (Article 85), is set forth in Article 57. This Article prohibits direct investment in real estate, mining rights, water rights, industrial or intellectual property, and vehicles, as well as direct engagement in industrial, commercial, agricultural or other activities unrelated to investment. For this reason, these strategies are typically structured through companies in which the fund invests (Article 64).

With regard to digital assets, Law No 21,521 (the “Fintech Law”) defines “virtual financial assets or crypto-assets” (Article 3, No 3) and includes the intangible assets that represent them within the definition of a financial instrument (Article 3, No 8). Thus, it brings them within the scope of the financial services it regulates. No regulation expressly permits or prohibits funds from investing in them. In practice, the CMF’s registry includes public investment funds whose internal regulations provide for direct or indirect investment in cryptocurrencies. Since these regulations are merely filed with the CMF without prior approval (Articles 47 and 49 of the LUF), this does not amount to express authorisation. Separately, NCG No 526 establishes capital requirements for exposure to crypto-assets in the asset managers’ own portfolios.

As for cannabis, neither the LUF nor the CMF specifically regulates or prohibits investing in companies linked to cannabis; therefore, the sector-specific framework applies, as set out below.

• Law No 20,000 penalises cultivation without authorisation (Article 8) and authorised growers who divert their production (Article 10).
• Authorisation is granted by the Agricultural and Livestock Service (Article 9), in accordance with the procedure set forth in Supreme Decree No 867 of 2007. It may not be granted to legal entities whose representatives, administrators, or partners have been convicted under that law or under Law No 19,913.
• Supreme Decree No 84 of 2015, issued by the Ministry of Health, reclassified cannabis to Schedule II of Supreme Decrees Nos 404 and 405. Furthermore, it empowered the Institute of Public Health to authorise and regulate its use in pharmaceutical products.

Since the fund cannot directly cultivate or process cannabis, it invests through companies that hold these authorisations. Due diligence focuses on the validity of the authorisations, the traceability of the production destination, the suitability of partners and managers, and the risks of money laundering.

Regarding litigation financing, there are no specific regulations in Chile governing third-party litigation financing, nor are there any rulings by the CMF regarding its acquisition by funds. Its admissibility is analysed under the general rules of the LUF (Articles 56 and 57, investment and valuation policy of the internal regulations) and general law regarding the assignment of claims and rights.

Finally, it is worth noting that, in practice, Chilean start-ups have secured financing in all the areas highlighted.

Chilean funds, particularly FIPs, tend to invest through subsidiaries or special purpose vehicles (SPVs) rather than holding the assets directly, mainly because the fund, and in particular the FIP, under Article 57 of the LUF, is not permitted to carry out operational activities: as it cannot “operate” a business (typically in the property sector), it invests in the shares of a company that does so and receives its profits. This is complemented by the rationale of segregating risk, raising debt at the vehicle level rather than at the fund level, structuring private equity transactions and channelling investments abroad via holding companies or feeders.

The FIP is the ideal instrument for club deals and joint investment vehicles amongst a limited group of partners; in institutional private equity, sidecars or co-investment SPVs that invest alongside the fund, as well as parallel funds, are also used to accommodate investors with different regulatory or tax profiles. The key requirement is that the use of intermediate companies must serve a genuine business purpose and not be used for tax avoidance.

A Chilean local fund must be managed by a local entity; public funds (mutual and investment funds) require an AGF, which is a special corporation incorporated in Chile, operating on an exclusive basis, authorised and supervised by the CMF; and FIPs may be managed by an AGF or by a Chilean closed corporation. It is not possible to manage a local fund from abroad without a local vehicle. The AGF must meet substantive requirements regarding presence and substance:

• minimum net worth;
• a board of directors and senior executives who pass the CMF’s fit-and-proper examination;
• an actual organisational and functional structure with segregated front-, middle-, and back-office functions; and
• policies and manuals covering risk management and internal control, information security, and anti-money laundering.

A Chilean fund is neither a corporation nor a limited partnership, but rather a special-purpose trust without legal personality; thus, there are no “fund directors” or “general partner.” Governance rests with the management company’s board of directors (and, in the case of investment funds, the unitholders’ meeting and, at times, a supervisory committee).

Regarding physical and personnel presence. there is no rule requiring a specific number of square metres of office space, but there is a requirement for effective operational substance in Chile, a local address, qualified personnel for critical functions, and independent operational capacity; thus, a purely nominal AGF will not be granted authorisation to operate or commence operations. Portfolio management may be partially delegated, but regulatory responsibility and administration remain with the local entity.

Chile distinguishes between the compliance officer appointed for anti-money laundering purposes and the person or persons responsible for the company’s broader crime-prevention compliance framework.

For AML purposes, entities subject to the Chilean AML regime, including fund managers, must appoint an AML compliance officer. Under the regulations issued by the Financial Analysis Unit (Unidad de Análisis Financiero or UAF), the AML compliance officer must hold a senior position within the reporting entity (eg, an area or division manager), so as to ensure sufficient independence in the performance of their duties. The reporting entity must also provide the officer with the necessary human and technological resources and access to all relevant transactions, documents, and records.

Separately, Law No 20,393, which governs the criminal liability of legal entities, provides that an adequate crime-prevention model must assign responsibility for implementing its prevention protocols to one or more persons with appropriate independence, effective management and supervisory powers, sufficient resources, and direct access to the company’s governing body. Accordingly, these functions may be performed with the assistance of, or assigned to, appropriately qualified external professionals, provided that the statutory requirements regarding independence, authority, resources and direct access to management are effectively met.

Management and Outsourced Functions

Responsibility for managing the fund cannot be delegated (Article 15 LUF), but the fund manager may contract external services for acts or activities necessary for its operations, including portfolio management. This authority must be set forth in the internal regulations, and the costs of outsourcing portfolio management are always borne by the fund manager (Article 16). The LUF does not require that these service providers be local. Oversight is exercised through the management company, which must manage the risks associated with outsourcing in accordance with NCG No 510 (effective as of 1 February 2025).

Custody

The fund manager must directly entrust a securities depository regulated by Law No 18,876 with the custody of instruments eligible for custody (Article 53 LUF). NCG No 235 regulates exceptions for non-custodial instruments and requires that foreign instruments be held by domestic or foreign entities that meet the requirements it establishes.

Audit

For non-redeemable funds, the ordinary meeting annually appoints the external audit firm from among a shortlist of three candidates proposed by the supervisory committee and from those listed in the registry maintained by the CMF (Article 73(e) LUF). The same meeting appoints any independent experts or appraisers that may be required (Article 73(f)). Private investment funds must also be audited annually by firms listed in that registry (Article 87). The reports of the auditors of the fund manager and the fund must address internal controls and compliance with the internal regulations (Article 21).

Anti-Money Laundering

General fund management companies and companies that manage private investment funds are regulated entities under Law No 19,913 (Article 3). They must appoint an officer responsible for liaising with the Financial Analysis Unit. UAF Circular No 62 of 2025, effective as of 1 June 2025, requires that this compliance officer hold a position of high responsibility within the entity.

Crime Prevention

The prevention model set forth in Law No 20,393, as amended by Law No 21,595, requires the appointment of one or more individuals responsible for implementing the protocols, who must have adequate independence, effective management and supervisory authority, and direct access to senior management. It also requires periodic evaluations by independent third parties (Article 4).

Non-Local Providers

There is no general registration regime for foreign fund managers, corporate service providers, or board service providers that provide services to a Chilean fund management company. The situation is different for those who professionally provide services in Chile that are regulated by the Fintech Law, such as the custody of financial instruments, brokerage, order routing, or investment advisory services. Such providers must register with the Registry of Financial Service Providers, have a registered office in Chile, and obtain authorisation for the service (Articles 5 through 7 of Law No 21,521). NCG No 502, as amended by NCG No 524, provides for two exceptions:

• Domicile: it exempts foreign entities that provide these services solely to qualified investors and have not been subject to sanctions for serious violations in the past ten years from the requirement to have a domicile in Chile and, consequently, from the requirement to operate exclusively in Chile (Section I.C.3).
• Authorisation: it exempts entities registered in the Registry that meet these same conditions from the authorisation requirement and from compliance with NCG No 502 itself. This exemption covers only investment advisory services, credit advisory services, crowdfunding platforms, order routing, and alternative trading systems, and does not cover custody or brokerage (Section II.G).

MK4 (Pending)

It was introduced in the Chamber on 9 September 2026, as a matter of utmost urgency; For mutual funds, key provisions include the expansion of eligible assets, changes to the rules governing reinvestment between funds, a streamlined registration process to open up the private debt market to medium-sized companies, the authorisation of REPO/Reverse REPO transactions for pension fund administrators (AFPs), and a tax package with changes to capital gains exemptions and stamp taxes; the opposition has already indicated it will review the tax provisions and REPO/Reverse REPO provisions “article by article.”

New Regulatory Compendium for Funds and AGFs (CMF, Under Consultation)

It consolidates more than 80 regulations and includes a summary sheet, standardised key facts, and a suitability requirement.

New Capital and Guarantee Regime for AGFs (NCG No 526)

With phased implementation beginning in 2026, it changes the minimum capital requirement to a model based on risk-weighted assets.

2025 Pension Reform

Generational funds and a phased increase (2025–2027) in the limits for AFPs to invest in alternative and private equity funds, redefining the primary source of institutional demand.

Data and AI

Law No 21,719: impacts KYC and automated decision-making, and the AI bill remains under consideration.       

Local Chilean sponsors predominate; the industry has more than 50 asset management firms (with both domestic and international capital); alternative assets already account for nearly 70% of assets under management; and foreign participation is only around 6%, so the typical sponsor is a local asset management firm such as LarrainVial, Credicorp Capital, Banchile, Security, Ameris, Frontal Trust, Neorentas, and Link Capital, among others. Several of these firms, however, are linked to regional Latin American groups (Brazil, Peru, Argentina) that operate with teams in Chile, and there are private equity firms with a regional focus, such as Southern Cross.

When the sponsor is truly international, it typically does not set up its own fund in Chile; instead, access to its strategy is provided through a local feeder fund managed by a Chilean asset management firm (AGF) that invests in the global manager’s master fund.

In such cases, the sponsor is usually based in the United States or Europe (the United Kingdom, Switzerland), with the master funds domiciled in Luxembourg, Ireland, the Cayman Islands, or Delaware.

Sponsors act as managers through two basic structures: an AGF or, for FIPs, an ordinary, non-audited closed-end corporation, which is less expensive and more flexible. They are almost always part of a group structure: a holding company plus a regulated fund manager plus one or more investment management or advisory firms, where the deal team is based and to which portfolio management is delegated, plus separate vehicles for the carry. Team compensation and equity-based incentives are a key factor in the design, precisely because Chile does not have a tax-transparent limited partnership like the General Partner/Limited Partner model. Carried interest and key partners’ equity stakes do not fit well within a regulated AGF, so they are replicated through special classes of shares, a separate entity that holds the carried interest and the partners’ equity stakes, or performance fees at the management company level that are subsequently distributed.

The rationale is to keep the regulated entity strictly within its regulatory boundaries and to place the economic aspects in unregulated entities, where there is greater contractual freedom and better tax optimisation and talent retention.

The regulatory framework is based on the Single Fund Law (Law No 20,712), its implementing regulations (Presidential Decree No 129), the Corporation Law (Law No 18,046), and CMF regulations, and applies in full only to regulated fund managers. The AGF requires authorisation from the CMF to operate and commence activities, as well as minimum capital requirements, a board of directors and qualified executives, and manuals for risk management, internal control, information security, and anti-money laundering, and is subject to ongoing supervision and reporting. In contrast, the manager of a FIP (which may be a closed corporation) is not subject to the CMF’s regular supervision and is governed primarily by its internal regulations and the reporting obligations applicable to private funds. The law establishes that the management company operates on behalf of and at the risk of the investors and must act with due diligence and in the investors’ exclusive interest, with enhanced duties of loyalty and care, a prohibition on related-party transactions detrimental to the fund, management of conflicts of interest, and liability of the management company and its directors for any damages they cause. In addition, in investment funds, there are shareholder meetings and, where applicable, a supervisory committee serving as governance checks and balances. Regarding disclosure, for public funds it is extensive and publicly available, whereas for FIPs, transparency is essentially private and contractual.

Alternative fund managers in Chile, whether AGFs or closed corporations that manage an FIP, are taxed like any other business entity; they are subject to IDPC on their profits (currently 27% under the general semi-integrated regime), and their owners complete their tax liability with the IGC or AT upon withdrawal or distribution, using the corresponding IDPC credit depending on the tax regime. Unlike the fund, which is a transparent vehicle that does not pay IDPC, the management company is a full taxpayer; its taxable income consists primarily of management fees, that is, the management commission, and any performance fees it receives, minus its necessary expenses. A key feature is that remuneration for fund management is exempt from VAT under Article 83 of the LUF, with certain nuances depending on the type of service and the contributors’ residence; however, services outside the scope of fund management may be subject to VAT.

Chile does not have a specific exemption that guarantees that a foreign fund managed from Chile does not constitute a permanent establishment (PE). The framework is the general one, under Law No 21,210; Article 2(12) of the Income Tax Law (LIR) expanded the concept of a local PE, which is separate from the PE concept under double taxation treaties (Article 5). Consequently, a manager in Chile acting on behalf of a foreign fund could trigger PE status and the attribution of taxable income in Chile based on an analysis of functions, assets, and risks. There are general protections in place, such as the independent agent exception, under which a management company that manages third-party funds as its ordinary course of business and with legal and economic independence should not, in principle, constitute a permanent establishment for its clients; and, conversely, the LUF regime, which taxes non-resident investors in Chilean funds only on distributions, without the mere holding of fund shares creating another taxable presence in Chile.

In Chile, there is no special regime or preferential treatment for carried interest; it is taxed according to the vehicle through which it is channelled. If it is paid as a performance fee to the asset manager (AGF or management firm), it is considered ordinary income from services subject to IDPC (27%) and then to the IGC or AT for its owners, with a VAT exemption under Article 83 of the LUF. If it is structured through a special series of fund shares, it follows the contributor regime under Article 82 of the LUF; the fund is transparent, and the gain is taxed at the holder’s level. Residents are subject to IGC/IDPC and the SAC credit, while non-residents are subject to the 35% AT or the 10% flat tax on qualifying public funds.

Chilean regulations allow fund managers to delegate or outsource functions, including both portfolio management and operational functions.

The requirements are:

• delegation does not relieve the fund manager of liability; the fund manager remains liable to the investors for the management of the fund at their expense and risk, and to the CMF for regulatory compliance;
• the delegated functions must be specified and disclosed; where applicable, the identity of the manager or advisor is typically reflected in the fund’s internal regulations and in the information provided to investors;
• the fund manager must maintain the ability to effectively supervise and control the delegate, through contracts, outsourcing policies, risk management, and internal controls that cover service providers, as well as safeguards for operational continuity and information security;
• conflicts of interest and related-party rules must be managed, especially when delegation occurs to a manager or advisor within the same group (with implications beyond transfer pricing); and
• the management company retains the obligation to report to the CMF and to safeguard the assets in accordance with regulations.

In the case of FIPs, since they are not subject to routine supervision by the CMF, outsourcing is governed primarily by internal regulations and contracts, allowing for greater flexibility but maintaining the same level of responsibility on the part of the management company toward the investors.

The requirements apply to the fund manager. From a financial standpoint, under NCG No 526, the AGF no longer has a fixed capital requirement of 10,000 UF, but rather a minimum net worth equal to the greater of 5,000 UF and 3% of its risk-weighted assets, which may be increased based on its risk management practices, plus a guarantee for each managed fund of at least 10,000 UF, updated to the greater of that amount and 1% of the fund’s daily net assets (up to 1.2%). On the non-financial front, the following are required:

• actual operational substance in Chile;
• a structure with segregation of duties (front/middle/back office);
• qualified personnel for critical functions; directors and executives who pass the CMF’s fit-and-proper exam; and
• manuals and systems for risk management, internal control, information security, business continuity, and anti-money laundering.

Regulatory and investor approvals may both be required, depending on the type of transaction and fund.

From a regulatory standpoint, a change in control of an asset management firm, whether through a merger, sale, or restructuring of its parent company, is a material event that must be reported to the CMF, and the resulting management firm must continue to meet the requirements regarding its existence, net worth, guarantees, and the suitability of directors and executives; if the transaction involves establishing or modifying the management company, or if a new controlling party takes over, the CMF intervenes through its authorisation and oversight powers, and the new executives and directors must pass the suitability examination.

Changes such as amendments to a fund’s internal regulations, the merger of funds, or the replacement of the management company are effected by filing with the CMF and, in the case of investment funds, also require the approval of the unitholders. From the investors’ perspective, in investment funds, the unitholders’ meeting is the body that approves structural matters, such as a change in the management company, a merger or division of the fund, substantial amendments to the internal regulations, or dissolution, typically with qualified quorums; dissenting unitholders are usually granted the right to withdraw or redeem their units as agreed; a mere change in the controlling shareholder of the AGF’s parent company, on the other hand, does not always require a vote by the unitholders, although it does require their notification.

In an FIP, since it is not subject to routine oversight by the CMF, the provisions of the internal regulations and the contributors’ agreement take precedence, with less regulatory intervention.

There is still no general law on artificial intelligence in Chile. However, the use of algorithms by fund managers is already subject to specific sector-based regulations:

Under Law No 21,521, Article 8, paragraph 2, of the LUF, if algorithms or systems are used to automate functions related to the marketing of fund shares, investment decisions, transactions, or risk management, the entity must demonstrate to the CMF that they meet the necessary suitability requirements for the proper performance of those functions.

NCG 503 requires that, when the functions subject to certification are performed by an algorithm, the entity designate a certified individual responsible for verifying that the algorithm delivers expected results consistent with its purpose.

Those who provide recommendations on publicly offered securities based on algorithms must disclose that fact, who developed the algorithm, and its general operation (NCG No 504).

Three sets of regulations apply across the board.

• Personal data protection: the processing of personal data (that is, data pertaining to natural persons) is currently governed by Law No 19,628. As of 1 December 2026, it will be governed by the amendment to that law under Law No 21,719, the postponement of which is currently being debated in Congress. This reform recognises the right not to be subject to decisions based solely on automated processing, including profiling (Article 8 bis), requires impact assessments for high-risk processing (Article 15 ter), and establishes the Personal Data Protection Agency.
• Cybersecurity: Law No 21,663 classifies banking, financial services, and payment methods as essential services, with a duty to report incidents to the National Cybersecurity Agency.
• Operational risk management: the consolidated text of CMF NCG No 510 establishes in Section 1.3 that operational risk management policies and procedures must include, at a minimum, the following related areas, including information security and cybersecurity, business continuity, and outsourcing of services. The entity must take these areas into account in the reports prepared by the departments responsible for risk management and internal audit, as applicable.

There is still no specific AI regulation for fund managers nor a CMF standard dedicated to AI, but its use is already governed by cross-cutting regulations. The main cross-cutting framework is Law No 21,719 on data protection and automated decision-making, which requires a legal basis, ARCO rights, impact assessments, traceability, and human review. These are supplemented by Law No 21,663 (cybersecurity) and Law No 21,595 on economic crimes (the board of directors’ duty of care, with compliance implications).

In practice, a manager must inventory and classify its AI systems by risk, monitor data and biases in investment or compliance decisions, manage vendors through contracts, and maintain traceability and human oversight without compromising their fiduciary and risk management duties to the CMF.

In principle, the clearest regulation, the bill governing AI systems (Bulletins 16.821-19 and 15.869-19), is currently in its second reading in the Senate; however, at this point, it is not yet possible to predict what the final text will be.

Interest in alternative investments has grown in recent years, and today they are the dominant category in the Chilean investment fund industry, accounting for approximately 70% of assets under management, driven by the search for higher returns and diversification in a deteriorating local market environment. The most common types of investors are institutional investors, AFPs, insurance companies, and, to a lesser extent, banks, as well as family offices and high net worth individuals, who show a strong preference for private markets, foreign strategies, and US dollars.

Private banking is also a significant participant and has driven the boom in semi-liquid products. Retail investors participate indirectly due to illiquidity, high minimum investment thresholds, and suitability rules.

The groups posing the greatest challenges are the AFPs, due to their heavy regulatory burden, and foreign investors, whose participation remains low (6%) because of tax uncertainty, as well as KYC, Foreign Account Tax Compliance Act (FATCA)/Common Reporting Standard (CRS) Compliance Regime, and foreign exchange requirements; and, in the case of FIPs, highly concentrated or family-owned portfolios, which are required to have at least eight contributors, each with a maximum stake of 20%, to maintain tax transparency.

Side letters are permitted and are used in practice, particularly in FIPs and funds targeting institutional investors, to agree on special terms with investors

There is no rule that expressly regulates them, but there are relevant limitations:

• they may not violate the principle of equal treatment among investors in the same series or the fund’s internal regulations;
• they may not contravene the LUF or mandatory rules; and
• they may not be used to circumvent regulatory or tax requirements.

Regarding authorisation and disclosure, public funds are not required to have each side letter approved by the CMF, but any changes to structural terms must be reflected in the filed internal regulations and, if relevant, disclosed.

In FIPs, the terms agreed upon take precedence, with less regulation, but the fund manager remains subject to its duties.

Regarding the obligation to offer rights to other investors, there is no general legal duty to extend them, unless a most-favoured-nation clause has been agreed upon, which contractually obligates the fund manager to offer certain investors the best terms granted to others.

Public investment funds may be marketed through a public offering to any investor, with their shares registered with the CMF’s Securities Registry and listed on a stock exchange.

FIPs, on the other hand, may not make public offerings or advertise: they are placed privately among a limited group of up to 49 investors who are not members of the same family, with a requirement of at least eight investors, each holding no more than 20% of the fund, to maintain tax transparency.

As for local investors, they may invest in alternative funds established in Chile, subject, depending on the vehicle, to the suitability rules and minimum investment requirements of public funds or to the private and limited nature of the FIP.

Therefore, the restriction is not based on nationality, but rather on the distribution channel (public offering versus private placement) and the investor’s profile and suitability.

Public funds may only be marketed and advertised once they have been authorised, their internal regulations have been filed with the CMF, and their shares have been registered with the Securities Registry, through an AGF, and with advertising subject to CMF regulations.

FIPs are prohibited from conducting public offerings and advertising; they may only be placed through private placement.

To bring in foreign funds, a public offering requires registration, while private placements to qualified investors may qualify for the exemption under NCG No 336.

Marketing from Chile to other countries is governed primarily by the rules of the destination country.

Regarding disclosures, for public funds, the filing of the bylaws and the registration of the shares must be completed before marketing begins.

Ongoing obligations include regular reporting to the CMF (NCG No 532), material events, IFRS financial statements, updating filings in response to changes, and ensuring that all advertising complies with regulations.

For FIPs, the key requirements are reporting on private funds and compliance with the prohibition on public offerings.

The main products and channels designed to provide access to alternative investments are:

• local feeder funds managed by Chilean asset management firms (AGFs), which provide access in pesos or dollars, with lower minimum investment requirements, to global strategies, private debt, and infrastructure without the need to open an account abroad;
• semi-liquid or evergreen funds, targeted by private banks at high-net-worth individuals and family offices, which offer periodic liquidity windows and subscription at net asset value; and
• publicly traded funds, whose shares can be purchased on the secondary market, providing indirect access even to smaller investors.

The predominant channel remains private banking and intermediaries, and the real focus is on the high net worth and qualified investor segments rather than on mass retail investors, who participate only to a limited extent due to minimum investment requirements, illiquidity, and suitability rules.

In Chile, pension savings are primarily institutionalised. In the mandatory savings system (AFP), access to alternative investments is determined by the AFP within the Investment Regime (subject to limits set by the Central Bank and the Superintendency of Pensions), not directly by the participant; the major impetus comes from the 2025 pension reform and the new generational fund system, which treats alternative investments as “growth assets,” gradually raises their limits, and establishes sub-limits for private equity, with exposure through local public investment funds, co-investment, and foreign private equity and debt vehicles.

In voluntary savings (APV/APVC), which is the closest thing to a self-managed scheme, the saver does choose the investment vehicle and can invest not only through AFPs but also through AGFs, mutual and investment fund managers, insurance companies, banks, and intermediaries with plans approved by the CMF, channelling savings into products with an alternative component, although direct access to illiquid vehicles remains limited by suitability requirements, minimum investment thresholds, and liquidity constraints.

In Chile, unlike the U.S. Rule 506(c), there is no such thing as a “private placement with advertising”: the logic is binary, and advertising is precisely what pushes an offering into the public domain. That is why promoters must be especially careful.

FIPs are expressly prohibited from advertising returns or investments and from making public offerings; for foreign funds, the private placement route is governed by the private offering exemption under NCG No 336, the core of which is precisely to avoid using mass media or general advertising, to target a limited group of qualified investors, and to include the required disclaimers (stating that the securities are not registered and are not regulated by the CMF). Mechanically transferring a 506(c)-style campaign to Chile risks the CMF reclassifying the offering as an unauthorised public offering, with the resulting penalties.

Regarding reverse solicitation, it is indeed a method used and accepted as an exception when it is the local investor who, genuinely and on their own initiative, seeks out the product; however, it is a narrow and risky exception that cannot be fabricated or preceded by marketing, and it must be documented (evidence that the contact originated with the investor).

The use of third parties for placement is common in Chile, but it is channelled through regulated entities.

The distribution of fund shares is typically carried out through the AGF itself, stockbrokers, securities intermediaries, and advisors, all of whom are subject to the CMF’s oversight and its rules of conduct.

Brokerage activities are regulated; anyone placing securities in a public offering must be licensed to act as a broker, and marketing is subject to advertising and offering rules (NCG No 336).

In the case of FIPs, since they involve private placements, there is greater contractual freedom, but the prohibition on public offerings and the duties of the management company still apply.

With regard to compensating staff for their sales efforts, this is permitted but subject to limits:

• conflicts of interest must be disclosed and managed;
• the fiduciary relationship and the duty of suitability toward the client must be respected;
• compensation must fall within the fund’s authorised expenses as set forth in its internal regulations; and
• labour and tax regulations must be complied with.

The tax treatment depends on the type of investor, based on the common principle that the fund is transparent, does not pay IDPC, and the tax is levied on the contributor upon distribution of profits, treated as a dividend from a corporation (Article 82 of the LUF), and upon the sale of shares.

The tax treatment varies by investor type.

• Resident individuals are taxed under the IGC regime, using the IDPC credit generated by the underlying investments.
• Resident corporations record the profit in their books and defer final taxation until withdrawal by their owners, with the IDPC credit being integrated to avoid corporate double taxation.
• Pension funds (AFPs) and other retirement savings enjoy an advantageous regime, they do not pay income tax on investment returns, which are taxed only when the participant receives their pension.
• Non-residents are subject to a 35% additional tax withheld at source, subject to double taxation treaties, unless they opt for the 10% flat tax available in certain public investment funds geared toward foreign investment, a benefit that does not apply to FIPs.

A Chilean investment fund is an unincorporated entity which, furthermore, operates as a transparent vehicle that does not pay IDPC; therefore, its classification as a “resident” and as a “person” benefiting from the treaty, requirements set out in Articles 1 and 4 of the OECD Model Convention, which Chilean CDTs follow, is debatable, as many treaties require the entity to be “subject to taxation” in order to be considered a resident, and the fund does not, in fact, pay tax at the vehicle level.

In practice, this is handled in two ways.

• For inward investment (non-residents investing in Chilean funds), the benefit of the treaty is realised at the contributor’s level; the 35% additional withholding tax on distributions may be reduced in accordance with the DTA applicable to the investor, and there is also the LUF’s one-off 10% tax as a favourable domestic regime in certain public funds.
• For outward investment (the fund investing abroad), the possibility for the fund to directly invoke Chilean CDTs to reduce withholding tax in the source country depends on how that country and the treaty treat collective investment vehicles.

Compliance with FATCA and CRS falls to financial institutions, including asset management companies (AGFs) and other fund managers, which must identify reportable accounts, carry out due diligence and submit reports.

• Under FATCA, Chile has a Model 2 Intergovernmental Agreement with the US: under this model, Chilean institutions report information on accounts held by US persons directly to the IRS (subject to the account holder’s consent), must register and obtain their GIIN, and are subject to the rules designed to avoid a 30% withholding tax on certain US-source payments.
• Under the CRS (OECD standard for automatic exchange of information), Chile participates via the Convention on Mutual Administrative Assistance and the Multilateral Competent Authority Agreement (MCAA): here, institutions report to the SII, and it is the SII that automatically exchanges the information with other jurisdictions, identifying the tax residence of the account holder and the controllers of entities.

In practice, both are integrated into the contributor’s onboarding/KYC process through a self-certification of tax residence (and of US person status), validation of indicators and annual reporting; non-compliance exposes the contributor to penalties from the SII and, under FATCA, to US withholding tax, and the processing of this data is subject to the new Data Protection Act 21.719.

The Chilean anti-money laundering and KYC regime is based on Act No 19,913, which established the Financial Analysis Unit (UAF) as the governing authority, supplemented by the criminal offence of money laundering and by regulations on the financing of terrorism (Act No 18,314).

The list of regulated entities is extensive and includes banks, brokerage firms, insurance companies and, in particular, AGFs and other capital market participants, alongside notaries, casinos, etc. Their key obligations are:

• to implement a prevention system comprising a manual, a compliance officer and a risk matrix;
• to carry out customer due diligence (CDD/KYC) to identify and verify the customer and their activities;
• to identify the ultimate beneficial owner (ultimate controller) and apply enhanced due diligence to higher-risk customers;
• to treat Politically Exposed Persons (PEPs) with special care;
• to maintain records; and
• to train staff.

With regard to reporting, they must submit Suspicious Transaction Reports (STRs) to the UAF without any threshold and subject to confidentiality, as well as Cash Transaction Reports (CTRs) for transactions exceeding the threshold of USD10,000 or its equivalent.

The UAF supervises, issues regulations and may impose administrative sanctions in the form of substantial fines; non-compliance also entails liability for the legal entity under Law No 20,393, reinforced by Law No 21,595 on economic offences, which tightened the framework for sanctions and corporate compliance.

The processing of investor data, provided that such investors are individuals, is currently governed by Law No 19,628. On 1 December 2026, the amendments to this law under Law No 21,719 are scheduled to take effect (notwithstanding the bill currently under consideration, which proposes postponing the effective date to 1 December 2027).

The amendment introduces five main changes:

• new grounds for lawfulness;
• ARSOP+ rights (including the rights of access, rectification, erasure, objection, portability, and blocking, among others);
• rules on automated decision-making and impact assessments;
• the Personal Data Protection Agency;
• a penalty regime with fines of up to 20,000 Monthly Tax Units (UTM) for very serious violations, in addition to fines calculated as a percentage of annual revenue for companies that are not small businesses.

In cybersecurity, Law No 21,663 establishes a tiered set of obligations depending on whether an entity is a provider of essential services or a critical infrastructure operator (the latter being subject to the heaviest regulatory burden). In this regard, the law includes financial services among essential services. Covered institutions must report incidents to the National Cybersecurity Agency: an early warning within three hours, an update within 72 hours, and a final report within 15 calendar days. Operators of vital importance have additional obligations, including the requirement to notify the public affected by the data breach. However, the applicability of the Cybersecurity Law is subject to some uncertainty.

At the sectoral level, asset management firms must manage information security as part of their comprehensive risk management and outsourcing policies (NCG No 510). Furthermore, as institutions providing information to the Open Finance System, they will be subject to the consent, authentication, and security rules of NCG No 514. Those that opt for the simplified participation regime, available to entities with fewer than 100,000 unique customers, are exempt from the customer-data interfaces and the consent dashboard requirements.

MK4 (Under Consideration)

MK4 introduces tax measures affecting investors, including changes to capital gains exemptions on liquid stock market transactions and bonds, and amendments to stamp duty (Article 107 of the Income Tax Act, concerning stock market presence, is also affected). Under its “regional financial centre” pillar, it includes a tax credit equivalent to 35% of the investment to attract capital and seeks to provide greater tax certainty and permanent establishment clarity for foreign investors. It also broadens the range of eligible assets and access to new products.

2025 Pension Reform

For members, generational funds replace multi-funds and change how their savings are invested, with greater exposure to alternative investments and private equity.

Expanded Access to Alternative Investments

The new suitability duty set out in the CMF Compendium, the standardised summary sheet and semi-liquid/evergreen products aim to facilitate access for high net worth investors and, gradually, retail investors.

Data Protection (Law No 21.719)

This strengthens investors’ rights as data subjects (ARSOP, automated decision-making, profiling), with implementation scheduled for December 2026, subject to a possible postponement.