Alternative Investment Funds

AIFs are essentially funds characterised as such in light of the EC Alternative Investment Fund Managers Directive (‘AIFMD’). Accordingly, and in principle, any Fund targeting professional investors and which is managed by an Alternative Investment Fund Manager (in terms of the AIFMD) or which, in the case of a self-managed fund, holds more than €100million assets under management or which opts-in to benefit from EU/EEA passporting entitlements, would be characterised and regulated as an AIF.

The units or shares of a Maltese AIF may be marketed to professional investors in any another EU or EEA Member State by virtue of the said passporting entitlements and/or to Qualifying Investors having a minimum investment requirement of EUR 100,000.

Structure

An AIF can be structured as an investment company (SICAV or INVCO), a contractual fund, unit trust or as a limited partnership.

Please refer to UCITS’ structure for information about setting up and AIF as a SICAV, contractual fund, unit trust and limited partnership.

Differently from a UCITS Fund, an AIF may be set up as a closed-ended investment company (INVCO), being a public company having a fixed share capital and restricted business. The business of an INVCO has to be restricted to the investment of its funds mainly in securities or operating as a retirement fund. The activities are further restricted as follows: the company’s holdings in any other company not being an investment company with fixed share capital cannot exceed 15% by value of its investments; the distribution of the company’s capital profits is prohibited by its memorandum and articles of association and no more than 15% of the income derived from securities can be retained by the company. However, an INVCO can still operate as a SICAV where the share capital is divided into different classes of shares, with each class of shares representing a distinct sub-fund of the AIF.

Service Providers

Manager

An AIF may only appoint an AIFM, in terms of the AIFM directive.

Investment advisor

AIFs ordinarily do not appoint an investment advisor.

Depositary

The AIFM must appoint a single depositary for each AIF it manages. The depositary shall either be a licensed EU credit institution, a licensed EU MiFID firm authorised to provide the services of safe-keeping of assets or any other entity permitted to act as depositary.

The depositary must be independent from the asset manager and shall not be engaged as the valuer. The depositary may also act as prime broker, acting as counterparty to the AIF, subject to certain conditions being met.

Administrator

An AIF may appoint an administrator, which role may also be carried out by the AIFM.

Valuer

The AIFM or the AIF (if self-managed) shall be responsible for the valuation of the assets of the AIF.

Prime Broker

The AIF or the AIFM on behalf of the AIF may appoint one or more prime brokers or counterparties.

Auditor

An AIF shall appoint an approved (by the MFSA) auditor.

Capital Requirements

The AIF is to have sufficient financial resources at its disposal to enable it to conduct its business effectively, to meet its liabilities and to be prepared to cope with the risks to which it is exposed. It is to maintain an “initial capital” of EUR 300,000 and that the NAV of the AIF is expected to exceed this amount on an ongoing basis.

In addition, if the portfolio of the AIF exceeds a value of EUR 250 million, it i

Marketing of the AIF

If the AIF is managed and subject to the full AIFM Directive requirements, it can be marketed to Professional Investors in the EU/EEA through the passporting regime or Retail Investors under stricter national rules.

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