On 30 March 2022 came into force the Decree of the Minister of Economy and Finance no. 19 of 13 January 2022 (the "Decree"), which amended Ministerial Decree no. 30 of 5 March 2015 for the purpose of redefining the conditions for participation in Italian reserved alternative investment funds ("AIFs") by non-professional investors holding medium/large assets.
Main novelties and regulatory changes
As a general remark, the Decree has changed the initial investments' thresholds in Italian AIFs. Beforehand, only the following subjects were entitled to purchase Italian AIFs' units:
- professional investors (i.e., clients who possess the necessary experience and expertise to make their own informed investment decisions and properly assess the risks they take, such as banks, investment firms, other authorised or regulated financial institutions, insurance companies, collective investment schemes and related management companies, pension funds and management companies, large companies that have at least two of the following requirements: total balance sheet equal at least to € 20,000.000, a net turnover equal at least to € 40,000.000, and own funds of at least € 2,000.000);
- non-professional investors investing a total amount of not less than € 500,000.00;
- asset management company's Board members and employees without any specific entry threshold.
In consequence of the entry into force of the Decree, Italian AIFs may be subscribed by:
- non-professional investors who, within the ambit of an investment advisory service, purchase units for an initial amount not lower than € 100,000.00, provided however that the total amount of such investment does not exceed 10% of their financial portfolio and taking into account that such minimum subscription cannot be split.
- individual portfolio managers purchasing units on behalf of non-professional investors for an initial amount not lower than € 100,000.00.
In addition, pursuant to the Decree, in the context of the provision of investment services, the offeror of Italian AIFs' units to non-professional investors must ensure that such investment does not exceed 10% of the potential investor's financial portfolio1. Furthermore, the potential investor must provide the offeror with accurate information on his/her financial portfolio and any other investments already made.
The latter provision being in line with Article 21, paragraphs 2-bis and 2-ter, of Consolidated Financial Act (namely, Legislative Decree 24 February 1998 no. 58, as amended), according to which authorised intermediaries shall ensure that the products offered or recommended are designed to meet the needs of a specific market of target clients and that the distribution strategy of such products is compatible with the above target clients (under the so-called "product governance" rule).
This long-awaited law intervention could have an huge impact on the Italian financial market. Indeed, AIFs are products typically aimed at upper-affluent and private clients, who are highly capitalised and able to bear the risk associated with illiquid investments in unlisted markets in order to improve the efficiency of asset allocation, with the prospect of decentralised and - potentially - very substantial returns in the medium-to-long term.
Now, as a result of the introduction of the Decree, non-professional investors with medium/large assets are offered the possibility of gaining returns on their investments even when the market trend is in a negative phase, yet bearing the related risks.
In light of the foregoing, access to this form of alternative investment to a wider category of potential investors in medium/long term illiquid assets and unlisted companies may result in increasing portfolios' diversification, achieving appreciable returns, and at the same time, providing alternative sources of financing to Italian unlisted companies (particularly, SMEs), while fostering Italy's economic recovery.
On the other hand, the focus remains on the protection of non-professional investors, in light of applicable MIFID II's principles of transparency and investor protection.
In this scenario, venture capital and private equity firms may benefit from the opening of Italian AIFs to non- professional investments. Given the constant need for higher investments in the real economy, the novelties introduced by the Decree thus represent a potential boost in the alternative funds' market, increasing, in turn, the ability to raise capital for the development of start-ups/SME's with greater development potentials (among which, Fintech companies).
1. Including bank deposits and insurance investment products available from other intermediaries or managers.
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.