Legal Form for Professional Investor Funds
As in all other types of funds, a Maltese Professional Investor Fund maybe be set up in either of the following corporate forms:
- a collective investment company
with variable share capital (SICAV);
- a collective investment company
with fixed share capital (INVCO);
- a unit trust;
- a mutual fund; or
- a limited partnership.
Professional Investor Funds Nomenclature
Maltese funds target investors in accordance with their minimum investment threshold. The character of the fund is non-retail and therefore not subject to some of the usual restrictions on their investment or borrowing powers as normal retail funds.
Nomenclature usually used to refer to these type of funds includes Professional Investor Funds, Hedge Funds, Expert Funds & Institutional Funds. These are but a few names used to refer to funds that target professional investors and/or high net worth individuals.
Malta Professional Investor Funds may be sold solely to investors who satisfy the minimum investment threshold:
- Experienced Investors are subject to a minimum investment threshold of US$ 20,000, (or equivalent in any convertible currency)
- Qualifying Investors are subject to a minimum threshold of US$ 100,000 (or equivalent in any convertible currency) and
- Extraordinary Investors are subject to a minimum investment threshold of US$ 1,000,000, (or equivalent in any convertible currency).
In all PIFs, the Board of Directors and Service Providers must satisfy the MFSA ‘fit & proper’ test. All service providers may be established outside Malta provided that they are established and regulated in a recognised jurisdiction and a local Judicial Representative is appointed. Malta Professional Investor Funds may also benefit from self-management.
Besides the minimum investment threshold of US$ 20,000 (which minimum investment threshold applies to each single Experienced Investor) other conditions include that requirements that show that the Experienced Investors are persons having the expertise and knowledge to be in a position to make their own investment decisions and understand the risks involved.
An investor must state the basis on which he/she satisfies this definition, by confirming that he/she is a person:
- having relevant work experience having at least worked in the financial sector for one year in a professional position or having been active in this type of investment; or
- having 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
- who has carried out investment transactions in significant size at a certain frequency; or by giving any other appropriate reason.
The Experienced Investor PIF must appoint a Custodian with a safekeeping and monitoring role; the leverage required is the same level as that of UCITS and the only specific investment restrictions adopted are those that are self-imposed by the Manager.
Besides the minimum investment threshold of US$ 100,000 (which minimum investment threshold applies to each single Qualifying Investor) other conditions include that the investor must certify that he/she/it meets one or more of the following criteria:
- a body corporate which has net assets in excess of USD1.0 million or which is part of a group which has net assets in excess of USD1.0 million;
- an unincorporated bona fide body of persons or association which has net assets in excess of USD 1.0 million;
- a trust where the net value of the trusts assets is in excess of USD1.0 million;
- a person having reasonable experience in the acquisition and/or disposal of:-
- funds of a similar nature or risk profile;
- property of the same kind as the property, or a substantial part of the property, to which the PIF in question relates.
- an individual whose net worth or joint net worth with that persons spouse, exceeds USD 1.0 million;
- employees and directors of service providers to the PIF;
- relations and close friends of the promoters limited to a total of 10 persons per PIF;
- entities with (or which form part of a group with) USD 5.0 million or more under discretionary management or advice, investing on its own account or for the account of its clients;
- he/she/it qualifies as a PIF promoted to Qualifying Investors.
A Custodian / Prime Broker need not be appointed provided that there are adequate safekeeping arrangements; there are no investment or borrowing restrictions and there is unlimited use of leverage.
Besides the minimum investment threshold of US$ 1,000,000 (which minimum investment threshold applies to each single Extraordinary Investor), a few other conditions/criteria apply to PIFs that target Extraordinary Investors:
- the PIF has no investment or borrowing restrictions;
- there is unlimited use of Leverage
- a Custodian/Prime Broker need not be appointed provided that there are adequate safe keeping arrangements
- Prospectus is not necessary – a marketing document is enough
- the Fit & Proper test in respect of Service Providers, Directors and Founder Shareholders need not be concluded pre-licensing as MFSA will be relying on the information declarations in the application documents and supporting documentation
- When one or more service providers are not regulated in recognised jurisdiction, the Fit & Proper test in respect of such Service Provider (s) must be concluded pre-licensing
- may be set up as a self-managed fund
A Malta Professional Investor Funds must issue an Offering Document which is a document intended to provide sufficient information to enable potential investors to take an informed investment decision. The Offering Document must be approved by the PIFs Board of Directors (or its external Manager, if appointed) and a written copy of their approval must be provided to the MFSA.
Listing of Malta PIFs on a Recognised Investment Exchange
A PIF (provided that it is not a private company) may apply to a Recognised Investment Exchange for a listing. A PIF which is established abroad, marketed exclusively abroad and obtains a licence from the MFSA solely for the purpose of obtaining a listing on a Recognised Investment Exchange, must appoint a judicial representative in Malta.