Funds and Fund Managers

Funds and Fund Managers: Professional Investors Funds (PIFs)

PIFs are collective investment schemes designed for professional and high net worth individuals. While they cannot be offered to the public at large, only to persons having expertise, experience and knowledge and who are in a position to make their own investment decisions and understand the risks involved, the law allows for a degree of flexibility in their regard.

A staggering majority of funds in Malta are Professional Investor Funds (PIFs). What makes a PIF such a popular investment scheme is that they serve as a flexible vehicle which allows professional or wealthy investors to self-manage their fund without the restrictions usually imposed on retail funds. There are no investment restrictions apart from those on PIFs sold to experienced investors which are subject to certain restrictions. PIFs benefit from fast-track licensing, with approval being granted within two to three months if all documents are in order, the low entry levels, with €10,000 being the minimum investment threshold for experienced investors, and the fact that PIFs are Sharia-compliant, making PIFs accessible to any type of serious investor.

A PIF typically takes the form of open-ended public or private limited liability investment companies with variable share capital (SICAVs), but also take the form of an INVCO, public limited liability company, limited partnership or a unit trust and may be constituted as a multiclass fund or an umbrella fund. In view of the island’s successful PIF regime in the past years, one may predict that PIFs will continue to be a popular choice for both EU and non-EU alternative fund managers.

Currently, the law provides for a threefold classification of PIFs:

• PIFs promoted to Experienced Investors (or Experienced Investor Funds) – granted to those who have relevant work experience with a minimum investment threshold of €10,000
• PIFs promoted to Qualifying Investors (or Qualifying Investor Funds) – granted with a minimum investment threshold of €75,000
• PIFs promoted to Extraordinary Investors (or Extraordinary Investor Funds) – granted with a minimum investment threshold of €750,000

Funds and Fund Managers: Alternative Investment Funds (AIFs) and Managers (AIFMs)

AIFs are a special class of collective investment schemes which are established using a variety of legal forms, each having characteristics suited for particular needs. A Maltese AIF may be set up as:

• A limited partnership or partnership en commandite;
• A unit trust, constituted by a trust deed between a management company and a trustee;
• A mutual fund;
• An investment company with variable share capital (“SICAV”); An investment company with fixed share capital (“INVCO”), the former being the most popular.

Alternative Investment Funds (AIFs) fall within the remit of the Alternative Investment Fund Managers Directive (AIFMD). The AIFMD creates a passport for EU AIFMs authorised under the directive to market units or shares in their EU AIFs to professional investors in all EU Member States without needing to comply with any further local requirements. The AIFMD regulates both alternative fund managers and the promotion of alternative funds within the EU. This is why it is of particular importance to Malta, as it continued to encourage the significant growth in the alternative investment fund business which Malta has experienced since EU accession.

AIFs are defined as collective investment undertakings which raise capital from a number of investors with a view of investing therein in accordance with a defined investment strategy, and which do not require authorisation under the UCITS Directive.

As of 11 February 2016, a new fund regime was launched for Alternative Investment Funds – the Notified AIF. The Notified AIF will not require licensing by the Malta FSA and will not be subject to ongoing supervision. A list of Notified AIFs in good standing will be available on the Malta FSA’s website. 

Funds and Fund Managers: Malta UCITS Funds

Undertakings for Collective Investment in Transferable Securities (UCITS) are retail fund products which are harmonised throughout  Europe and can operate throughout the EU on the basis of a single authorisation from one member state, provided that it follows certain notification procedures.

A UCIT qualifies as such if the fund has:

1. As its only object the collective investment in transferable securities and/or in other liquid financial assets, of capital raised from the public which operate on the principle of risk-spreading;
2. Units which, at the request of holders, may be repurchased or redeemed directly or indirectly, out of those undertakings’ assets.

UCITS can be established using a variety of legal forms, each having characteristics suited for particular needs. In fact a Maltese UCITS may be set up as:

• A limited partnership whose capital is divided into shares
• A unit trust – constituted by a trust deed between a management company and a trustee.
• A common contractual fund
• An investment company with variable share capital (SICAV)

With regards to Funds and Fund Managers in UCITS, a Fund Manager may be optional as funds may be either self-managed or managed by a company approved by the MFSA, and they must have satisfactory financial resources and liquidity at disposal. Fund Managers have to demonstrate sufficient and relevant experience and all roles, responsibilities and experience must be described in the fund prospectus.

In the case of a self-managed scheme which takes the form of a company, the initial paid up share capital should not be less than €300,000, but if it is managed by a third party manager, it may be set up with a capital of €125,00.

Our Funds and Fund Managers Team

Our Funds and Fund Managers team focuses on the structuring and setting-up of funds and the provision of on-going advisory at post-licensing stage. We assist our clients with the drafting of all regulatory documents, including offering memoranda and ancillary agreements. We provide an ‘all-in-one’ service, connecting clients to high quality personnel and service providers in the jurisdiction and generally act as a primary reference point for all aspects of the project. Our firm has an abundance of experience in matters dealing with funds and fund managers and pays particular focus to the creation of funds which follow unorthodox investment strategies or which use unconventional structures. Our dedicated team of Funds and Fund Managers lawyers and professionals is a practical one, giving constructive advice which is not too legalistic, but which centers around the practical, real-world needs of the applicant.