Malta Professional Investor Funds - or PIFs - are collective investment schemes designed for professional and high net worth investors. Due to the fact that they cannot be offered to the public at large, the law allows for a degree of flexibility in their regard. This because Malta Professional Investor Funds can only be offered to a person having the expertise, experience and knowledge to be in a position to make his own investment decisions and understand the risks involved.
Salient Criteria of Malta PIFs
The Malta PIF is the Maltese hedge fund equivalent and similar in concept to the Irish QIF and the Luxembourg SIF. Malta Professional Investor Funds are only accessible to investors who can meet certain minimum investment requirements.
In essence, Malta PIFs are Collective Investment Schemes promoted to Qualifying Investors and may be used as non-traditional investments as well as specialist instruments with a minimum investment of €100,000 or the equivalent in any other currency. It is imperative that the capital invested by each investor does not fall below this threshold at any time during the operation of the fund unless it is the result of the fall in the net value asset.
The minimum investment threshold is applicable to each individual investor, however, in the case of an umbrella fund comprising a number of sub-funds, the applicable threshold is determined on a ‘per scheme’ basis rather than on a ‘per sub-fund basis’. Essentially this allows investors to spread the investment requirement across various sub funds.
Prior to accepting an investment from any investor, the fund shall be required to obtain a completed Declaration form wherein the investor confirms that they have read and understood the mandatory risk warnings and to describe how the applicable requirements were satisfied by the qualifying investor.
It is important to note that the PIF Investor base was changed in 2016 and now PIFs are only available to Qualifying Investors as highlighted in the next section. PIFs which operated under the previous PIF regime which provided for a tripartite distinction between Experienced, Extraordinary and Qualifying Investors (the latter with a minimum initial investment limit of €75,000) will continue to operate under their respective regulatory regime as hitherto.
Qualifying Investor
A “Qualifying Investor”, is an investor which fulfils the following criteria:
1. invests a minimum of EUR 100,000 or its currency equivalent in the PIF/AIF/NAIFs which investment may not be reduced below this minimum amount at any time by way of a partial redemption; and
2. declares in writing to the fund manager and the PIF/AIF/NAIF that it is aware of and accepts the risks associated with the proposed investment; and
3. satisfies at least one of the following:
a. a body corporate which has net assets in excess of EUR 750,000 or which is part of a group which has net assets in excess of EUR 750,000 or, in each case, the currency equivalent thereof;
b. an unincorporated body of persons or association which has net assets in excess of EUR 750,000 or the currency equivalent;
c. a trust where the net value of the trust's assets is in excess of EUR 750,000 or the currency equivalent;
d. an individual whose net worth or joint net worth with that of the person's spouse, exceeds EUR 750,000 or the currency equivalent; or
e. a senior employee or director of a service provider to the PIF/AIF/NAIF.
Service Providers for Malta PIFs
The main service providers which a PIF requires to operate are a manager and an administrator. It is possible to have self-managed PIFs, and a third-party custodian is not required if the fund can show to the MFSA's satisfaction that it has adequate safekeeping arrangements in place. Moreover, the appointment of a third-party administrator is optional (though highly recommended in practice), and administrative services could be provided by the Manager instead. Recognition from the MFSA is required in the case of a person established in Malta providing administration services.
The details of the relevant service providers must be disclosed to the MFSA for approval, and the service providers need not necessarily be located in Malta. If a service provider is not established in an EU/EEA state or in a country with which the MFSA has a Memorandum of Understanding, the MFSA may still give its approval provided it is considered to be adequately regulated.
A PIF may appoint an Investment Adviser which has adequate experience and expertise necessary to fulfil such role. Furthermore, a PIF is required to appoint a Local Representative if the Scheme does not have a Director resident in Malta or a Maltese General Partner or some other form of local presence. The local representative will serve as the point of reference between the MFSA and the PIF, as well as receive/provide information from/to the MFSA. The role of the MLRO can be fulfilled by the PIF’s compliance officer.
Every PIF is bound to appoint an auditor approved by the MFSA to carry out the auditing of the PIF. A signed letter of engagement defining the auditor’s responsibilities and the terms of appointment has to be submitted to MFSA at application stage.
