Maltese Notified PIFs: A New Fund Structure – What Is Being Proposed?

By January 19, 2024 No Comments

Malta has long been a hub for innovative fund management, and in 2023 the Malta Financial Services Authority (MFSA) unveiled its latest offering to assist smaller managers: the Notified Professional Investor Fund, or NPIF for short.

Who will a NPIF be attractive to and why?:

This new structure is attractive to de minimis AIFMs and third country AIFMs looking for alternative fund structures based in an EU country. The fund is an unregulated structure, with managers required to notify the Malta Financial Services Authority (MFSA), rather than going through a full-blown licensing process.

The NPIF merges the appeal of Malta’s existing Professional Investor Fund (PIF) framework with the benefits of “Notified” status, creating an efficient solution for fund managers.

What sets NPIFs apart is their remarkable speed to market, making them a perfect fit for time-sensitive investment strategies.

The NPIF primarily targets de minimis Alternative Investment Fund Managers (AIFMs) with Assets Under Management (AUM) of less than €100 million when leveraged, or €500 million when unleveraged, and qualifying for the lighter regulatory regime defined by the EU’s AIFM Directive.

It is suitable for de minimis AIFMs across all EU Member States, as well as AIFMs in a wide range of non-EU third party domiciles, if they are authorised by the MFSA or an EU or third-party equivalent. In addition to the speed to market offered by the Notified PIF, the structure also allows de minimis AIFMs and third country AIFMs to have more direct control over the portfolio management process.

The industry has also seen a growing appetite for co-investment vehicles. A Notified PIF can be used very efficiently as a co-investment vehicle. A particular structure can also be used as a feeder fund into a master structure.

National private placement rules:

Any manager considering of setting up their fund as a Notified PIF must be aware that this fund does not have access to the marketing passport under the AIFMD but can be sold under the national private placement rules of the target countries. These differ considerably as some countries require a simple registration while others might offer a blanket exemption.

Key characteristics:

Notified PIFs will improve Malta’s appeal as a fund jurisdiction, particularly for US, UK and other third country investment managers.

  • Notified PIFs will be subject to a notification process rather than full licensing.
  • The notification process may be completed within 10 working days.
  • Promoters may benefit from lower setup and other operational and regulatory costs.
  • Marketing material and offering documentation will not (is this correct?) be reviewed and approved by the MFSA.
  • Notified PIFs can only be non-retail schemes available to Qualifying Investors, due to their risk level and minimum supervision.
  • Due to the minimum level of supervision, adequate risk disclosures are to be made to any prospective investors accordingly.
  • Any investment strategy, except for ‘Lending’ activity, will be allowed.
  • Notified PIFs can only be set up as third-party managed funds, managed by specific Alternative Investment Fund Managers (“AIFMs”).
  • Notified PIFs are not required to appoint a custodian.
  • Fund administration services must be carried out by a Maltese established and recognised fund administrator, such as Dixcart.
  • A third-party service provider shall conduct due diligence with respect to the Notified PIF, both at notification stage and on an ongoing basis.

Money Laundering Reporting Officer:

Notified PIFs must appoint a Money Laundering Reporting Officer (“MLRO”). This function may be delegated to:

  1. The administrator of the Notified PIF, provided that such administrator is:
    1. A recognised fund administrator; or
    1. Is authorised in an EU Member State or in a reputable jurisdiction.
  2. An officer of the Notified PIF who has sufficient seniority and command.
  3. At least one of the Directors must be resident in Malta.
  4. The MFSA shall be notified of the appointment, removal, or replacement of any service provider to the Notified PIF in advance of the change.
  5. The MFSA may remove a Notified PIF, including any Sub-Fund, from the List of Notified PIFs at any time at its sole discretion.

Regulation Details:

Apart from the introduction of a dedicated rulebook, in its effort to establish this new NPIFs framework, the MFSA is proposing amendments to the following Regulations:

  • Investment Services Act (List of Notified AIFs) Regulations (S.L. 370.34)
  • Investment Services Act (Exemption) Regulations (S.L. 370.02)
  • Investment Services Act (Fees) Regulations (S.L. 370.03)
  • Trusts and Trustees (Exemption) Regulations (S.L. 331.02)
  • Companies Act (Investment Companies with Variable Share Capital) Regulations (S.L. 386.02)

Additional Information:

For further information about Maltese funds and how they might be of advantage to you, please contact our Dixcart office in Malta: [email protected].