Since joining the EU Malta has become an attractive location to establish a fund. The legislation that was enacted at the time meant that additional fund regimes could be introduced. As a result, Malta has a reputation for being a cost-effective jurisdiction, offering multiple types of funds to choose from, depending on the preferred investment strategy.
All Maltese funds are regulated by the Malta Financial Services Authority (MFSA). Malta benefits from a series of European Union Directives which allow collective investment schemes to operate freely throughout the EU, on the basis of a single authorisation from one member state.
There are various different funds in Malta:
- Professional Investor Funds "PIF"
- PIFs are available only to Qualifying Investors
- Alternative Investment Funds
- A new category recently introduced as a result of the Alternative Investment Fund Managers Directive (AIFMD), and now comprising of retail NON-UCITS (Undertaking for Collective Investment in Transferable Securities) and PIFs. There are 3 categories of AIFs:
- AIFs promoted to Professional Investors
- AIFs promoted to Qualifying Investors
- AIFs promoted to Retail Investors
- Notified Alternative Investment Funds "NAIF"
- Private Collective Investment Scheme - maximum 15 participants and which does not require a Collective Investment Scheme licence, but needs to be recognised by the MFSA.
Various Fund Structures
Single-fund and multi-fund structures are available.
In multi-fund structures you have separate sub-funds / compartments with their respective investment themes.
Whereas in multi-fund (umbrella) structures, an election is made to have the assets and liabilities of each sub-fund within the umbrella structure treated, for all intents and purposes of law, as separate from the assets and liabilities of each other sub-fund of that structure (segregation of assets and liabilities).
Need to Instruct a Service Provider
In Malta, each fund requires a service provider for day-to-day management.
Below is a brief overview of the key roles involved in a fund and their specific duties:
Board of Directors
The Board, which is nominated by the Founder Shareholders, is responsible for the general affairs of the scheme, including the appointment of a service provider. In order to adhere to the Maltese regulatory requirements, the Board should:
- be composed of no less than three members;
- one of the Directors must be resident in Malta;
- one of the Directors must be independent.
The majority of the board meetings must be held physically in Malta. Directors of a NAIF are not subject to a due diligence assessment by the Regulator but will be subject to due diligence assessment by the AIFM (Alternative Investment Fund Manager), assuming responsibility of the NAIF.
Manager (unless self-managed)
The Investment Manager is the person responsible for the discretionary investment management of the assets of the Fund. This includes; establishing or reviewing investment policy; rules for stock selection; portfolio construction; investment techniques and instruments; as well as negotiation and implementation of the acquisition and disposal of the investments.
This management function includes certain risk management activity, which depends on whether the fund is a UCITS and the AIFMD regime.
Funds (such as UCITS, retail non-UCITS, PIFs or AIFs) which do not appoint an external Investment Manager, are called self-managed schemes. This self-managed option is only available where funds are bodies corporate (whose structure allows the full assumption of the management function by the administration).
Self-managed funds must comply with specific provisions applicable to them under MFSA rules (in the form of supplementary licence conditions), including rules on the initial capital requirements of self-managed schemes.
The Fund Administrator is the person appointed by the Scheme or its Manager, responsible for the provision of administration services to the Fund. Fund administration services typically include the following:
- preparation of Net Asset Values;
- pricing the investment portfolio;
- preparation of contract notes;
- registrar functions;
- payment of bills;
- fund accounting;
- preparation of financial statements;
- performance reporting;
- compliance reporting.
Compliance Officer and Money Laundering Reporting Officer.
The NAIF, is required to comply, on an ongoing basis, with the provisions of local laws and any applicable rules and regulations, as well any other applicable regulations in any jurisdictions where it is marketed. In this regard, the NAIF must appoint a Compliance Officer, who, in terms of the local requirements, must be the same Compliance Officer as of the AIF.
The Board of the NAIF is also responsible for compliance with its obligations under the Prevention of Money Laundering and Funding of Terrorism Regulations. The NAIF must therefore also appoint a Money Laundering Reporting Officer.
The Fund must also have the following service providers in place; the MLRO, Compliance Officer, Custodian, Auditor, and Investment Advisor depending on the type of fund.
Set-up of a Malta Fund - gathering investors from an EU country and the rest of the world such as; US, Thai, China and Middle East. The proposed fund will focus on purchasing buildings to refurbish, plots of land integrally held in an EU country. During the first year, the first round of investments will be around ?20 million.
- Option A - Launch of a new dedicated collective investment scheme with one sub-fund at launch, structured as a Maltese Notified Alternative Investment Fund ("NAIF"). A dedicated collective investment scheme will provide you with the possibilities to; (i) build your own brand, (ii) launch additional sub-funds in the future under the same brand name, (iii) retain control; you will hold certain voting rights, including the rights to choose the Directors and Service Providers, and (iv) receive income via the founder shareholding.
- Option B - Launch of a new sub-fund under an already existing collective investment scheme. The SICAV (société d'investissement à capital variable) would be an already existing Notified AIF, and therefore included in the list of NAIFs held by the Malta Financial Services Authority. The launch of an additional sub-fund within an existing structure will improve the time to market and the total expense ratio of the fund, since certain fixed costs (such as Directors' remuneration and insurance, for instance) are shared between the sub-funds that are launched.
The proposed solutions offer fund promoters such as; an investor, pension fund, insurance company, bank or management company, different cost-effective ways to launch a product and the possibility to access the market quickly.
Elise Trustees, a sister company of Dixcart Management Malta, holds a fund administrator licence and can therefore provide a comprehensive range of services including; fund administration, accounting and shareholder reporting, corporate secretarial services, shareholder services and valuations.
The fund (the Collective Investment Scheme), must itself be licensed by the MFSA.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.