If you are an investment funds' promoter, private equity firm, family office, licensed or unlicensed asset manager, investments broker or similar and currently considering the set-up of an investment fund, this section provides some practical tips for your decision making.
Several considerations in launching a fund shall be looked at, these including:
- Main aim of having a fund
- Target investors
- Underlying investments
- Investment strategy
- Fund’s initial size
- If listing is important and if so the type of listing
- Inhouse expertise & qualifications and your main business line.
The answers to the above as well as further clarifications will lead in the selection of the structure, which can take the form of:
- Undertaking for Collective Investment in Transferable Securities (“UCITS”)
- Alternative Investment Fund (“AIF”)
- Professional Investor Fund (“PIF”) or equivalent
- Investment holding limited company.
In case of a fund, a further consideration is whether it will be set-up on an existing Funds’ Platform or if it will be on a dedicated funds structure.
It is important to speak and to be able to continue speaking with specialised people having a holistic experience and understanding on/as:
- funds’ set-ups and launch
- asset management
- fund administration, including investors’ onboarding
- investments’ valuations
- banking, financial brokerage & payments
- governance, corporate due diligence, and AML
- placement agent
- financial legislation, accounting & taxation
- business owners.
Whilst in Malta one can address all the above structures, its niche is on AIFs and particularly its unique PIFs.
These are funds, which raise capital from some investors, with a view of investing it in accordance with a defined investment policy and which do not qualify as UCITS. Thus, hedge funds, private equity funds, real estate fund and venture capital funds fall within this category. AIFs are required to appoint a custodian / depositary authorised by the MFSA and an External Valuer if the AIF is self-managed.
AIFs main benefit is that once approved by an EU regulator, they can trade across the whole EU.
PIFs enjoy a more flexible regulatory regime and fast-track licensing process and usually do not require a custodian / depositary. A PIF is an efficient and flexible vehicle which allows managers to conduct both traditional and alternative type of investments, including innovative or unorthodox ones. Such funds are available for Qualified Investors who can invest a minimum of €100k, accept risk and satisfy a minimum of €750k wealth criteria or otherwise are a senior employee or director of a service provider to the PIF. The maximum size of a PIF structure is €100million above which they will need to convert to AIFs, with typical sizes in Malta ranging between €5million and €20million.
PIFs do not benefit from passporting rights within the EU or EEA like UCITS and AIFs, but they are still regulated EU structures, are suitable for all investment strategies including hedge funds, private equity funds, venture capital funds, and are also ideal for crypto funds and property funds.
A PIF may invest either directly or indirectly in cryptocurrencies.
Malta is an established fintech hub, hosting a variety of technology, payment service providers, electronic money institutions, gaming and crypto companies and consequently has built a qualified pool of professionals and regulator with whom business can be conducted in a licensed and regulated way. The management team and board of the PIF structure are expected to have the collective experience on information technology, virtual currencies, DLT and other related underlying technologies.
The Malta fund regulatory framework was updated to allow the set-up of Crypto funds as PIFs and with the expected coming in force of the EU led Markets in Crypto-assets Regulation (MiCA) in 2024, this niche market is expected to expand exponentially, with Malta being an ideal jurisdiction which has already identified and implemented regulatory safeguards to strengthen investors’ confidence.
PIFs can be structured to invest in immovable property, usually done through SPVs. Such PIFs do not have investment or borrowing restrictions if they are set-up as close-ended funds, and in case they are open-ended funds, there is a maximum of 50% leverage restriction based on net asset value.
PIFs can also be invested in property management and/or property financing companies by investing in any combination of shares or bonds issued by such companies. With the exception of a possible maximum exposure of 10% of net asset value to unlisted securities, the remaining must be invested in listed securities on the primary market of a recognised investment exchange.
Within Axion International Funds SICAV P.L.C. and Fiduscorp Ltd, we have a dedicated and specialised team with a combined experience of over 200 years and can:
- Set-up a New SICAV, including work on:
- Regulatory applications and meetings
- SICAV company formation, this including any necessary SPVs
- SICAV and Fund/s’ offering documentation
- SICAV M&A, resolutions & other related documentation
- Due diligence documentation for MFSA and MBR
- Filling in the necessary roles for:
- Directors & Company Secretary
- Investment Committee/Management, other
- Compliance, MLRO, other
- Negotiations with other service providers, such as bank, brokers administrators, auditors
- Taxation & financial statements preparation
- Offices & team recruitment, if needed.
- Offer our Turn-key solution through Axion International Funds SICAV P.L.C. (the “Platform”). This is the ideal structure for those wanting to start in a short period, their fund is not expected to start with more than €25 million, will not have retail investors, and do not have all the expertise to cover the different aspects of investment fund set-up, management, and administration.
An initial discussion will help us together arrive at the best solution to your needs.