Types of Malta Fund Management Companies (Cat2)

Types of Malta Fund Management Companies (Cat2)

MALTA UCITS MANAGEMENT COMPANIES

The licensable activities of a Malta UCITS Management Company include the below:

  1. The management of UCITS Schemes and/or Schemes not classified as UCITS and which cannot be marketed within the EU and EEA (such as a Professional Investor Fund as defined by the Malta Investment Services Rule books). The said management activities are composed of the below functions:
    • Investment Management of the Scheme / Fund
    • Administration of the Scheme / Fund
    • Marketing of the Scheme / Fund
  2. Subject to the MFSA’s authorisation, the UCITS management company may be involved in the management of investment portfolios – including pension funds – which portfolios include instruments as listed in the second schedule of the ISA;
  3. Subject to the MFSA’s authorisation, the UCITS management company may be involved in Non-Core investment services such as investment advice of instruments listed in the ISA’s second schedule and the safekeeping and administration in relation to units of collective investment undertakings.

In addition to the above, the Investment Services rules lay down the Financial Resources Requirement applicable to UCITS Management Companies licensed in Malta which must have own funds equivalent to an initial share capital of, at least, €125,000.  Should the portfolio values being managed by the UCITS Management Company exceed €250 million, the licence holder will be required to provide 0.02% of any increments of the €250 million threshold as additional amount of own funds.

MALTA ALTERNATIVE INVESTMENT FUND MANAGEMENT COMPANIES (AIFMs)

The licensable activities of a Malta AIFM include the below:

  1. Portfolio Management of an Alternative Investor Fund (AIF);
  2. Risk Management of an Alternative Investor Fund (AIF). The AIFM shall at least carry any of (1) mentioned above and (2);
  3. Administration of an Alternative Investor Fund (AIF). The appointment of an administrator for any applicable Alternative Investor Fund (AIF, or Notified AIF (NAIF), do not list as mandatory the appointment of an administrator.  Thus, the AIFM may carry the administration of the AIF in-house.
  4. Marketing of an Alternative Investor Fund (AIF) and thus benefitting from the AIFM passport within the EU and EEA;
  5. Activities related to the assets of the AIF, namely:
    • Services necessary to meet the fiduciary duties of the AIFM,
    • Facilities management,
    • Real Estate administration activities,
    • Advice to undertakings on capital structure,
    • Industrial strategies and related matters,
    • Advice and services related to mergers of undertakings,
    • Advice and services related to the acquisition of undertakings,
    • Other services related to the management of AIFs.

In addition to the above licensable activities, the MFSA may authorise an AIFM to provide portfolio management services – including portfolios owned by pension funds and retirement schemes.  Furthermore, subject to the authorisation by the MFSA, the AIFM may offer non-core services in the form of investment advice, safekeeping and administration of shares or units held in units of collective undertakings, and the reception and transmission of orders in relation to financial instruments.  It is noted that an AIFM licence will not be granted should the AIFM be solely involved in such activities.

As Financial Resources requirements, the Investment Services Rules applicable to AIFMs state that such licence holders must have own funds the higher of:

  1. an initial share capital of €125,000. Should the portfolio values being managed by the AIFM exceed €250 million, the licence holder will be required to provide 0.02% of any increments of the €250 million threshold as additional amount of own funds;
  2. the fixed overheads requirements.

For the purpose of the financial resources requirements, AIFs that the licence holder is managing through delegation should be excluded from the calculation.  This means that only AIFs managed by the AIFM and AIFs for which the AIFM has delegated the management function should be taken into consideration of the financial resources calculation.

MALTA DE MINIMIS ALTERNATIVE INVESTMENT MANAGEMENT COMPANIES (De Minimis AIFM)

Following the transposition within the Investment Services Act of the Alternative Investment Fund Management Directive (AIFMD) in 2013, a management company, other than a UCITS, may opt for a De-Minimis licence should any of the below criteria are satisfied:

  1. Either directly or indirectly, through a company with which the AIFM is linked by common management or control, or by a substantive direct or indirect holding, manage portfolios of AIFs whose assets under management, including assets acquired through the use of leverage, in total do not exceed €100 million; or
  2. Either directly or indirectly, through a company with which the AIFM is linked by common management or control, or by a substantive direct or indirect holding, manage portfolios of AIFs whose assets under management in total do not exceed €500 million when the portfolio of the AIF s consists of unleveraged acquisition of assets and which redemption rights are exercisable during a period of 5 years following the date of initial investment of the AIF.

De Minimis AIFMs are subject to application and on-going requirements as outlined by the MFSA, including:

  • At application stage, the De Minimis AIFM must identify the AIFs that they will be managing;
  • At application stage, the De Minimis AIFM shall provide the MFSA with information regarding the investment strategies to be adopted for the AIFs to be managed;
  • On an ongoing basis, the De Minimis licence holder should provide the MFSA with the main instruments being traded and concentrations of the managed AIFs in order for the MFSA to monitor systematic risk;
  • The De Minimis licence holder should notify the MFSA once the criteria of (a) and (b) above are no longer met. Should this be the case, the licence holder should upgrade the licence category within 30 days from first notification to the MFSA;
  • The De Minimis licence holder should provide the MFSA with any additional information as required from time to time.

It should be noted that A De Minimis licence holder will not benefit from the AIFMD passport and any other rights as carried by the Directive itself.

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