A recent poll on our linkedin page indicated a preference towards structures following a lighter regulatory regime. This follows various discussions we have regularly especially with emerging managers, questioning the need and relevance of fully regulated structures in order to meet their objectives at launch stage. In this post we will explore why one would want to explore this route and options in terms of such structures in Malta to still achieve one’s objectives.
There are a number of elements typically effecting what level of regulation a manager opts for, including investor choices and preferences, and the level of initial AUM which might make it difficult to keep a good level of performance with costs to maintain it. In the initial stages of a fund a manager automatic marketing abilities offered by the more regulated structures might not be a priority. Main priority would probably be managing funds of a small group of investors through a fund structure rather than managed accounts mechanism and building a track record to eventually continue growing the fund. It might also be the case that the fund is being set up for a group of known investors with a clear tailored strategy in mind. Certain regulated structures might limit assets the fund can invest in, require an element of substance, involvement of more officers in the fund, and limitations on where the service providers might be.
Malta offers a number of options in this regard:
Notified Alternative Investment Fund (NAIF)
The notified AIF offers a quick set up process which makes time to market quicker. It has to be managed by an AIFM and therefore cannot be self managed. The appointed AIFM is the entity responsible for due diligence on the set up and involved individuals prior to the notification to be sent to the MFSA. The MFSA will then list the fund in the list of NAIFs. Whilst not directly supervised by the MFSA the AIFM is responsible for ongoing due diligence on the operations of the fund.
Professional Investor Fund (PIF)
The professional investor fund (PIF) is a regulated local structure which can be set up as long as the fund does not exceed the EUR100 million threshold. The PIF can onboard qualifying investors having a net worth of EUR750,000 and investing a minimum of EUR100,000 in the fund. Whilst regulated the PIF does not require certain functions imposed by the AIFMD and provides more flexibility in terms of the appointment of service providers to be appointed.
Notified Professional Investor Fund (NPIF)
Towards the end of 2022 the MFSA launched a consultation process in relation to the proposed NPIF. The aim is to facilitate smaller launches which can be managed by deminimis AIFMs or third country management companies. Whilst being very similar to the PIF, instead of going through a licensing process the proposed new structure will go through due diligence by a licensed service provider who will also be responsible for ongoing due diligence. The proposed NPIF does not require a Compliance Officer like other fund structures and does not require a local depository. The consultation process ended on the 31st of January 2023.
Reach out on firstname.lastname@example.org if you require guidance in relation to options for your planned fund launch.