A key driver of this growth has been the professional investor fund (PIF) regime for fund managers pursuing unorthodox investment strategies, which remains in place following the introduction of the Alternative Investment Fund Managers Directive (AIFMD) and which will still apply for de minimis fund managers.
Malta is now widely seen as a serious contender for all types of funds business and as operating on a level playing field with jurisdictions other funds jurisdictions. The table below illustrates the matter by contrasting Malta with Ireland and Luxembourg, the two other well established EU fund jurisdictions.
| MALTA | IRELAND | LUXEMBOURG | |
|---|---|---|---|
| Service providers | A PIF may appoint service providers according to its own needs. Typical service providers would be a Manager, an Administrator, an Investment Advisor, and/or a Custodian/Prime Broker. The appointment of a Custodian is a mandatory requirement for PIFs promoted to Experienced Investors. | Irish fund service providers require authorization either under the Investment Intermediaries Act (1995) or the Markets in Financial Instruments and Miscellaneous Provisions Act (2007). Whilst core fund administration activities must be performed by an Irish service provider, it is possible to outsource certain administration activities, for which the fund administration company retains ultimate responsibility. |
The main service providers for a SIF include the management company (common fund), depositary, central administration, registrar, transfer agent and auditor. |
| Other service provider requirements | Service Providers should be established and regulated in a Recognised Jurisdiction, that is, EU and EEA Members, as well as signatories to a Multilateral MoU or Bilateral MoU with the MFSA covering the investment services sector. There are instances where MFSA could accept Service Providers not established in a Recognised Jurisdiction if the Service Provider is the subsidiary of a firm that is regulated in a Recognised Jurisdiction, or if MFSA considers that the Service Provider is subject to equal adequate regulation in its jurisdiction. EU investment services providers can use the licence attained in their member state to passport their services and set up branches in Malta without the need to apply for a licence in Malta. |
EU investment services providers can use the licence attained in their member state to passport their services and set up branches in Ireland without the need to apply for a licence in Ireland. | EU investment services providers can use the licence attained in their member state to passport their services and set up branches in Luxembourg without the need to apply for a licence in Luxembourg. |
| Available legal structures | Companies with variable share capital (SICAV); Companies with fixed share capital (INVCO); Limited Partnership; Unit Trust; Mutual Fund |
Unit Trust; Investment Company (fixed or variable capital); Investment Limited Partnership; Common Contractual Fund (CCF); Qualifying Investor Fund (QIF) this investment fund vehicle is targeted at sophisticated and institutional investors; |
Specialized Investment Fund (SIF); Société d nvestissement en capital à risque - SICAR undertaking for collective venture capital investment; A SICAR can be incorporated as public company, private company, partnership limited by shares, private partnership, or a cooperative company; Undertakings for Collective Investment (UCI); |
| Investment restrictions | PIFs promoted to Experienced Investors (Experienced Investor Funds) Direct borrowing and leverage via the use of derivatives is limited to 100% of Net Asset Value. A PIF may invest up to 20% of its total assets in securities issued by the same body, and up to 30% of its assets in money market instruments issued by the same body. The scheme may invest up to a maximum of 35% of its total assets in deposits held with a single body. The Scheme may invest up to a maximum of 30% of its total assets in any single collective investment scheme which is a non-UCITS or which is not an open-ended collective investment scheme subject to risk-spreading requirements. Where the PIF is a fund of hedge funds, it shall invest in at least five hedge funds. Where the PIF enters into OTC derivative transactions, its exposure to a single counterparty should not exceed 20% of its total assets. PIFs promoted to Qualifying Investors (Qualifying Investor Funds) There are no investment or borrowing restrictions applicable to these types PIFs, except those which may be specified in their offering document, or if the Fund invests in immovable property. PIFs promoted to Extraordinary Investors (Extraordinary Investor Funds) These PIFs are not subject to any borrowing or investment restrictions other than those which may be specified in their officering document. |
Notice 13.12 issued by the Central Bank of Ireland delineates the general investment restrictions which are applicable to collective investment schemes other than UCITS. In particular, an investment by the scheme in securities which are not traded in or dealt on a market which is provided for in the deed of constitution or articles of association may not exceed 10% of the net assets of the scheme. There is a limit of 10% of net assets of the scheme concerning investment in securities issued by the same institution, unless the sole objective of the scheme is to invest in Irish equities. There are other restrictions concerning deposits with a single institution, investments in classes of securities issued by a single issuer, acquisition of units in other open-ended collective investment schemes and leverage, which may not exceed 25% of the net assets of the scheme at any time. However, notice 12.8 stipulates that the above conditions and restrictions may, on a case by case basis, be disapplied in the case of schemes marketing their units to professional investors only. |
As a rule, a SIF cannot invest more than 30% of its assets in securities of the same nature issued by the same issuer. However, this limitation does not apply to securities issued or guaranteed by an OECD Member State, or target UCIs which are subject to risk diversification principles similar to those applicable to SIFs. When making use of Financial Derivative Instruments (FDIs), appropriate diversification of the SIF underlying assets is necessary. Similarly, not more than 10% of net assets may be invested in securities issued by one particular issuer. Furthermore, it is not possible to subscribe to more than 10% of securities issued by one issuer. There are also rules concerning alternative investments, venture capital, future contracts and options as well as regarding real estate. An investment fund may borrow up to 200% of its net assets for investment purposes from first class credit institutions on a permanent basis. |
| Available Fund Types | There are three categories of professional investor funds: Experienced Investor Funds An xperienced Investor is a person who has the expertise, experience and knowledge to be in a position to make his own investment decisions and understand the risks involved. The minimum investment requirement is |
