Practice Areas > Investment Services, Fintech & Capital Markets > Funds & Investment Services > Types of Funds
PIFs
Professional Investor Funds (PIFs)
Professional Investor Funds (known as PIFs) are a type of fund which, as is clear from the name, are typically aimed at more experienced investors. Maltese law allows for three different types of PIFs which may be marketed to the following different types of investors with different criteria and levels of minimum investment.
- Experienced based on past experience. Minimum investment level in Euro – EUR 10,000.
- Qualifying based on past experience, or alternatively a net worth of EUR 70,000. Minimum investment level in Euro – EUR 70,000.
- Extraordinary based on a net worth of EUR 7,500,000. Minimum investment level in Euro – EUR 75,000.
A Maltese PIF may take the form of:
- An open-ended investment company with variable share capital (societe d’investment a capital variable, known as SICAV);
- A closed-ended investment company;
- A limited partnership;
- A unit trust;
- A mutual fund.
One of the reasons that Maltese law has been so successful in regulation of PIFs is that it allows some room for entrepreneurship and innovation in the fund structure, while simultaneously exerting a stable regulatory force over the operations of the fund.
Experienced and Qualifying Investor Funds have an obligation to publish an offering memorandum, which must first be vetted by the MFSA prior to its publication. Extraordinary Investor Funds do not have the same requirement, provided that instead they issue a brief marketing document.
It is also a possibility, for all three types of PIFs, for the service-providers of such funds to be established in jurisdictions other than Malta, so long as their jurisdictions are regulated in a manner acceptable to the MFSA.
The MFSA’s ‘in principle’ approval is a requirement with regards to all individuals involved in the fund’s operation, including directors, manager, administrators and custodians. This needs to be considered beforehand, as it may take around one month for all the approvals to be processed. When it comes to Extraordinary Investor Funds, the MFSA has obliged itself to give a reply to the application documents within three working days from their submission, for expedience’ sake.
In the case of PIFs which are upgraded to Extraordinary Investors, a custodian is required, whose duty it is to ensure that the fund observes the investment and borrowing powers as enshrined in the offering document as well as to safeguard the assets of the fund. However, no custodian is required in the case of PIFs promoted to Qualified Investors and Experienced Investors. Nevertheless, such fund may entrust its assets to a custodian or prime broker. Where no custodian is appointed, the Fund itself is responsible for maintaining arrangements for the safekeeping of the assets.
A PIF licensed in Malta may also be changed into a UCITS scheme.
UCITS
UCITS - Undertakings for Collective Investment in Transferable Securities
UCITS stands for Undertakings for Collective Investment in Transferable Securities. These are essentially a set of EU Directives that operate in order to allow collective investment schemes to be available throughout the EU, by virtue of authorisation from one Member State. This transferability is a very attractive feature for clients.
A Collective Investment Scheme (CIS) registered in Malta may be set up through a variety of different structures, including open-ended or closed-ended corporate entities, trusts or partnerships. Aside from CISs Malta also offers an attractive prospect for UCITS schemes. Since Malta joined the EU in 2004, there is also the possibility of passporting the rights for UCITS certified funds to other Eu member states. Correctly authorized and certified funds may move freely throughout the EU.
The most common means of setting up a Malta-based UCITS is as a corporate entity with a cariable share capital (societe d’investment a capital variable, known as SICAV). These entities may be set up with the aid of a locally-based fund manager, or else there is also the possibility of having a designated management company based in another state. Self-managed funds can be set up as corporate entities and certain management functions could be delegated to a separate management company so long as it is authorised in another EU member state.
Originally, the UCITS Directive was only applicable to the fund itself and not to the mangement company, however with the advent of the second Directive, known as the Management Directive, this became possible. This directive brought the management companies of UCITS into line with other investment firms which allow for the possibility of single passports under the Investment Services Directive. The Management Directive also contains a simplified marketing scheme for UCITS, including a short prosepectus within which information is collated in an accessible manner.
For further information regarding the setting up and maintenance of PIFs and UCITS under Malta’s jurisdiction, please contact one of our specialists.
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How we can help
Gonzi & Associates, Advocates is able to assist you with all aspects relating to the regulation and licensing of funds as well as of service providers to funds.