Malta Professional Investor Funds

Dr. Maria Chetcuti Cauchi | 07 Apr 2016

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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. The law currently provides for a threefold classification of PIFs:

·         PIFs promoted to Experienced Investors (or Experienced Investor Funds);

·         PIFs promoted to Qualifying Investors (or Qualifying Investor Funds);

·         PIFs promoted to Extraordinary Investors (or Extraordinary Investor Funds)

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 targeted at specliased investors who can invet a minimum amount.

A Malta PIF has to comply with:

  • the Investment Services Act (ISA),
  • the relevant Regulations and
  • the Investment Services Rules

The Investment Services Act 1994 (ISA) is the applicable regulatory framework for:

  • Investment services providers
  • Collective investment schemes (“CIS”), including PIFs

Malta PIFs 1: Experienced Investor Funds

A prospective investor must state the basis on which he qualifies as an experienced investor, either:
a. by confirming that he/ she is:

  • a person who has relevant work experience, having worked in the financial sector for at least one year in a professional position or a person who has been active in these type of investments; or
  • a person who has reasonable experience in the acquisition and/or disposal of funds of a similar nature or risk profile, or property of the same kind as the property, or a substantial part of the property, to which the PIF in question relates; or
  • a person who has carried out investment transactions in significant size at a certain frequency (for example a person who within the past 2 years carried out transactions amounting to at least EUR50,000 at an average frequency of 3 per quarter);

b. by providing any other appropriate justification.

Persons who qualify as ‘Professional Clients` in terms of the MIFID, automatically qualify as `Experienced Investors`. The minimum investment threshold allowed by law is EUR10,000 or the equivalent in another currency. A PIF promoted to Experienced Investors needs to appoint a third party Custodian responsible for the safe keeping of the assets of the PIF and for undertaking monitoring duties over the PIF’s Manager.

Malta PIFs 2: Qualifying Investor Funds

A Qualifying Investor is required to meet one or more of the following criteria:

  • a body corporate which has net assets in excess of EUR750,000 or which is part of a group which has net assets in excess of EUR750,000;
  • an unincorporated body of persons or association which has net assets in excess of EUR750,000;
  • a trust where the net value of the trust’s assets is in excess of EUR750,000;
  • an individual, or in the case of a body corporate, the majority of its Board of Directors or in the case of a partnership its General Partner who has reasonable experience in the acquisition and/or disposal of funds of a similar nature or risk profile;
  • an individual whose net worth or joint net worth with that person’s spouse, exceeds EUR750,000;
  • a senior employee or Director of Service Providers to the PIF;
  • a relation or close friend of the promoters limited to a total of 10 persons per PIF;
  • an entity with (or which are part of a group with) EUR3.75 million or more under discretionary management, investing on its own account.
  • the investor qualifies as a PIF promoted to Qualifying or Extraordinary Investors; i.e. a PIF investing in another PIF.
  • an entity (body corporate or partnership) wholly owned by persons or entities satisfying any of the criteria listed above which is used as an investment vehicle by such persons or entities.

The minimum investment threshold allowed by law is EUR75,000 or the equivalent in another currency. PIFs promoted to Qualifying Investors are not subject to any investment or borrowing (including leverage) restrictions other than those which may be specified in their Offering Document.

Malta PIFs 3: Extraordinary Investor Funds

An Extraordinary Investor is required to meet one or more of the following criteria:

  1. a body corporate, which has net assets in excess of EUR7.5 million or which is part of a group which has net assets in excess of EUR7.5 million;
  2. an unincorporated body of persons or association which has net assets in excess of EUR7.5 million;
  3. a trust where the net value of the trust’s assets is in excess of EUR7.5 million;
  4. an individual whose net worth or joint net worth with that person’s spouse, exceeds EUR7.5 million;
  5. a senior employee or Director of Service Providers to the PIF;
  6. the investor qualifies as a PIF promoted to Extraordinary Investors; i.e. a PIF investing in another PIF.
  7. an entity (body corporate or partnership) wholly owned by persons or entities satisfying any of the criteria listed above which is used as an investment vehicle by such persons or entities.

The minimum investment which the Scheme may accept is EUR750,000 (or its equivalent expressed in other currencies). PIFs promoted to Extraordinary Investors are not subject to any investment or borrowing (including leverage) restrictions other than those which may be specified in their Offering Document.

Comparison of Malta Professional Investor Funds

 

Experienced Investor

Qualifying Investor

Extraordinary Investor

Minimum investment

EUR 10,000

EUR 75,000

EUR 750,000

MFSA response time

7 business days

7 business days

3 business days

Self-management

Yes

Yes

Yes

Self-administration

Yes

Yes

Yes

Custodian requirement

Yes

No

No

Use of leverage

100% of NAV

Not restricted

Not restricted

Investment restrictions

Some restriction apply (mainly diversification criteria)

No restrictions

No restrictions


General

A PIF may appoint any Service Provider it may deem necessary – however, PIFs promoted to Experienced Investors are required to appoint a Custodian to be made responsible for the safe custody of the assets of the PIF and for monitoring the activities of the PIF’s Manager. In the case of a PIF promoted to Qualifying or Extraordinary Investors, although the MFSA recommends and would ordinarily expect the appointment of a Custodian for safekeeping the PIF’s assets, there is no obligation to have one. Where no Custodian is appointed, responsibility for the establishment of proper arrangements for the safe keeping of the PIF’s assets remains with the Directors/General Partner(s)/Trustee and officers of the PIF. The applicant will be required to outline – as part of the application process – the arrangements that will be put in place to ensure adequate safekeeping of the assets of the PIF.


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Reference Materials

Key Contacts

Dr Maria Chetcuti Cauchi

Senior Partner

+356 22056412

Mr Nicholas Warren

Senior Manager, Financial Services

+356 22056415

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