Establishing a Collective Investment Scheme in Malta
There are several types of investment funds that can be set up in Malta. These range from the traditional UCITS fund to Professional Investor Funds (PIFs), Alternative Investment Funds (AIFs), Private Funds and the recently launch Notified Alternative Investment Fund (NAIF).
UCITS funds, which tend to target retail investors, have the highest regulatory protection. They usually have a large target AUM to justify high set up costs and are subject to a number of restrictions, including, importantly, the requirement to diversify assets. As the name implies, PIFs target wealthy or sophisticated investors. As such, the regulatory rules governing PIFs are lighter resulting in lower setup costs and a faster time to market. Most investment funds in Malta are PIFs. Funds investing in non traditional assets classes, which includes most hedge funds, private equity funds and real estate funds, would be set up as AIFs. Private Funds are intended for no more than 15 investors who are limited to ‘family and friends’ of the sponsor or a defined group of persons known to the sponsor. NAIFs are Alternative Investment Funds which have an external manager licensed as an Alternative Investment Fund Manager (AIFM). With a NAIF the fund itself is not actually regulated- the onus of regulatory responsibility is on the fund manager who must be AIFMD (Alternative Investment Fund Managers Directive) compliant.
Company Formation
In terms of the legal formation of the investment vehicle, there are also a number of choices. The most popular is the SICAV (société d’investissement à capital variable) which is essentially an investment company with variable share capital. Closed ended funds or investment companies with a fixed share capital INVCOs are also permitted. Limited partnerships, unit trusts and common contractual funds are less common but can be constituted under Maltese law.
Setup Choices
Once the type of fund, its regulatory status and its legal formation have been established, the next step is to decide on how to structure your investment fund. There are 3 choices; a stand alone fund, a sub fund arrangement or a cell on a RICC (Recognised Incorporated Cell Company) platform. This is an important step which impacts not only the cost and speed of fund formation but also potentially the ongoing management and internal structure of your fund. In addition there are legal implications which need to be carefully considered.
The simplest structure is a stand alone fund where a new fund is created especially for your collective investment scheme. This is a bespoke option where your fund will be entirely independent of any other fund. It will not form part of an umbrella structure or sit on a platform but will exist in isolation. This option is the most expensive and would therefore be appropriate for very large investment funds where the costs can be justified.
A popular alternative is to use an umbrella structure where a sub fund is created to host your fund. This is normally done through a ManCo (Management Company) or Super ManCo. As the master fund is already regulated and fully established, the creation of a sub fund saves on costs and time.
In 2012 the Companies Act established the RICC platform, which allows multiple funds to exist on the same platform. The aim was to create a simple and economical option which brought together the advantages of a stand alone fund and the multi fund arrangements cited above.
RICC platforms are licensed by the MFSA and are able to hold multiple funds on the same regulated platform. Each fund is held in an independent cell and so enjoys the same legal separation and segregation of assets as a stand alone fund.
RICC platforms are able to use template application forms which have been pre-approved by the regulator, allowing for a simpler and faster regulatory process. This template approach extends to relationships with third party providers. Due to the economies of scale inherent in the RICC platform, new cells can leverage existing relationships with administrators, audit firms, law firms and custodians, enjoying competitive pricing from reliable service providers. In cases where a new fund already has a preferred service provider this can also be accommodated.
For more information on how Zeta can assist you please contact our Business Development department on bd@zeta-financial.com.