Investment Funds

In the past couple of decades, Malta has established itself as a fund domicile of choice for fund managers seeking to set up in a reputable EU jurisdiction which is still cost-effective. Since it became an EU member in 2004, Malta has incorporated a number of EU fund regimes, most notably the Alternative Investment Fund (AIF) and the Undertakings for the Collective Investment in Transferable Securities (UCITS) regimes, but has still kept its popular hedge fund regime, the Professional Investor Fund. Recently, Malta has also introduced an offshoot of the AIF regime which it dubbed the Notified Alternative Investment Fund (NAIF) which allows funds to be promoted within just 10 days while remaining fully EU law compliant and benefitting from EU passporting.
Malta Investment Funds

The Professional Investor Fund (PIF)– the Maltese Hedge Funds

Despite the introduction of the AIF, the PIF remains Malta’s most popular hedge fund. It is an efficient and flexible vehicle which allows investors to conduct highly innovative or unorthodox investment strategies. Indeed, the PIF can even be used to invest in cryptocurrencies. 

Unlike retail funds, Professional Investor Funds are only open to Qualified Investors who can invest a minimum of €100,000. An individual investor will need to contribute this amount which may not go below the set threshold. PIFs may also be set up as umbrella funds comprising a number of sub funds whereby the applicable investment threshold is determined on a ‘per scheme’ basis rather than a ‘per fund’ basis. This set up allows investors to spread the investment requirement across various sub funds. 

The Alternative Investor Fund (AIF) 

The AIF is a pan-European branded investment fund tailored for sophisticated and professional investors. This fund regime is available to investors in Malta following the state’s transposition of the Alternative Investment Fund Manager Directive (AIFMD). They are classified as collective investment undertakings which raise capital from several investors with a view of investing it in accordance with a defined investment policy for the benefit of those investors, which do not qualify as Undertakings for Collective Investment in Transferable Security (UCITS) scheme in terms of the UCITS directive. 

AIFs are generally controlled by less stringent requirements than UCITS which are targeted at retail investors since sophisticated investors are assumed to be knowledgeable of certain risks tied with this type of investment strategy. This regime captures, hedge, real estate, private equity and venture capital funds as well as all other funds which fall outside the scope of the AIFMD. 

AIFs benefit from EU passporting, thus can be offered to investors in any EU member state. 

The Notified Alterative Investment Fund (NAIFs)  

The AIFMD regime has often been criticised for being overly onerous and imposing a double burden on fund managers by regulating the manager and the fund itself. The Maltese solution to this problem was the creation of NAIFs which are a Maltese product aimed at providing fast-track access to fund managers seeking to market their fund throughout the EU. The NAIF regime allows the Alternative Investment Fund Manager to assume full responsibility for the NAIF and for the fulfilment of its obligations, thus allowing the AIF fund to operate with a mere notification to the regulator.  After notification of the AIF which falls within the remit of this regime, access to the market can be gained within just 10 days if the MFSA is satisfied that the documentation presented is in line with the requirements set. 
NAIFs are flexible vehicles which can also be used to market securitisation projects. 

Undertakings for Collective Investment in Transferable Security (UCITS)

UCITS funds as set out in the UCITS Directive and are liquid and transparent retail which can be marketed and distributed freely across the EU. Malta offers a cost-effective option coupled with a robust regulatory framework that allows for a degree of flexibility, yet is still fully compliant with the UCITS directive. A Malta UCITS fund will benefit from the possibility of setting up through various legal structures.

Benefit of Malta Investment Funds

There are various factors which contributed to Malta’s success in Investment Funds such as:
•    sound and sensible regulation which takes into account the needs of businesses whilst safeguarding the interest of investors,
•    low costs and favourable fiscal base which renders business models feasible where they would be unworkable elsewhere,
•    an approachable regulator, willing to discuss innovative ideas whilst requiring compliance to the highest standards,
•    ease of access to the European market for investment,
•    quick application turnaround times,
•    flexibility as to the choice of service providers, e.g. local fund administrators not being required,
•    Availability of self-managed structures,
•    Sub-fund (protected cell company) legislation, permitting the creation of ring faced pockets of assets and liabilities within the same legal entity.

Funds Managers are offered a variety of vehicles in Malta, which cater for a broad range of investment strategies to suit the needs of every type of investor. Most investment funds are structured as SICAVs, (investment companies with variable share capital) but can also be structured as an INVCO (Investment Company with fixed share capital), a unit trust, a contractual arrangement or a partnership.  The legal structures serve as vehicles for a variety of funds type, including Professional Investment Funds, retail funds and private collective investment schemes.

Our  Investment Funds Practice

Our Investment Funds practice focuses on the structuring and setting up of funds and on-going advice after post- licensing stage.  We help our clients with the drafting of regulatory documentation, including offering memoranda and ancillary agreements, and also manage relations with regulatory authorities.  Chetcuti Cauchi also offers its service to connect our clients with high quality personnel and service providers in the jurisdiction and also act as a primary reference point for all aspects of the project.  We particularly focus on the creation of funds which follow unconventional investment strategies or structures.

Our Investment Funds Lawyers work hand in hand with other practitioners in the firm to provide an-all-inclusive package to our clients. Our lawyers are also responsible for the set up and maintenance of a large portfolio of investment services companies and funds where we assist the clients on various aspects, including the selection of the most favourable  jurisdiction, choice of legal vehicle, and ensuring that such structures comply with all local company secretarial services for private and public companies, setting up of brick-and-mortar or online business operations assistance with the selection of external service provides, real estate advisory services and restructuring or redomicillation assistance.