Malta – redefining Collective Investment Schemes

The Investment Services Act (CAP. 370 of the laws of Malta) defines collective investment schemes as arrangements which, inter alia, “operate according to the principle of risk spreading”. By virtue of this definition, the requirement of risk spreading had been imposed on all licensed collective investment schemes alike and this irrespective of the type of collective investment schemes licence.

However, following a consultation process by the MFSA on the proposed implementation of the Alternative Investment Fund Managers Directive, collective investment schemes licensed as Professional Investor Funds (PIFs) and Alternative Investment Funds (“AIFs”) targeting Qualifying and Extraordinary Investors became exempt from risk spreading requirement. Furthermore AIFs which target professional investors are also exempt from the said risk spreading requirement. Nonetheless, risk spreading continues to be mandatory for UCITS, Non-UCITS Retail Schemes and, due to their quasi retail nature, for PIFs and AIFs targeting Experienced Investors.

To this end, as part of the transposition process relating to the AIFMD, the definition of collective investment schemes in the Investment Services Act was amended and a specific exemption was enshrined in the Investment Services Act (Exemption) Regulations.

This change was undoubtedly be welcomed by all fund managers currently/to be appointed as investment managers to hedge funds licensed in Malta as it gives them further flexibility when structuring and/or implementing the investment objectives and policies of such funds. Indeed by virtue of the said amendments a PIF/AIF targeting Qualifying/Extraordinary/Professional Investors may now be fully invested in one position.

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