Hedge Funds & Professional Investor Funds

Malta was one of the first European jurisdictions to introduce a specialised regime for professional investor funds in 2000.

The choice of Maltese domicile is based on:
1. the efficiency and flexibility of the Malta Financial Services Authority
2. EU membership as from 1st May 2004
3. local and international stock exchange listing options
4. an exemption from income tax and capital gains tax at fund level and at non-resident investor level
5. quality support services
6. low set-up and maintenance costs
7. subject to certain conditions, it is not obligatory to appoint a Custodian provided the Directors ensure that there are nevertheless adequate safekeeping arrangements which need to be described in the Offering Document
8. the possibility of ‘self-managed’ funds, i.e. the appointment of a third party fund manager is optional
9. fund service-providers may be based in any MFSA recognized jurisdiction
10. a fund manager may be established in Malta which will allow for example performance fees to be taxed at beneficial rates
11. the possibility to redomicile a fund from another jurisdiction.

The Maltese regime for professional investor funds (PIFs) recognises three types of funds: those targeting extraordinary investors (EXIF), those targeting qualifying investors (QIFs) and those targeting experienced investors (EIFs). QIFs have no investment or borrowing restrictions, need not appoint a custodian and the minimum entry level is of US$ 100,000 or equivalent. EIFs need to appoint a custodian and the minimum investment is US$ 20,000. Moreover, EIFs can leverage through borrowing or use of derivatives subject to a maximum limit of 100% of NAV. EXIFs are subject to a very light regulatory regime subject to a mininum investment of US$1 million and an investor net worth of US$10 million.

At CDF Advocates we have been closely involved in the development of the Maltese financial services industry. We have direct experience of a wide spectrum of financial product development and regulation over the past ten years. CDF Advocates’ expertise has been recognised by Legal 500, one of the foremost independent guides to the Maltese legal profession, year after year. We maintain close relationships with, and are held in high esteem by, the other major service providers which a hedge fund requires such as fund administrators, banks and audit firms.

We understand the hedge fund business and we can advise you on:
- the advantages of a Maltese domicile and its tax advantages
- obtaining a listing on the Malta Stock Exchange and on other stock exchanges
- prime brokerage arrangements, especially since we are familiar with the documentation of the principal UK-based prime brokers
- structuring performance fees
- fund distribution and marketing
- special purpose vehicles
- on-going compliance arrangements and support

Our law firm has responded to the needs of the regulator and the market by providing specialised compliance services for professional investor funds. Malta is recommended for all types of hedge funds, and for start-up funds the possibility of a self-managed fund reduces set-up and ongoing costs. For such funds the Malta Financial Services Authority requires at least one local director and local compliance arrangements, which we already successfully provide. Please click here for further information on our fund services and compliance team .

For further information on the legal regime governing investment funds, please download our brochure and visit the website of the Malta Financial Services Authority (www.mfsa.com.mt – choose “Securities” from the navigation menu and then choose “Guide to Regulation”). For a detailed analysis of hedge fund redomiciliation and other information on collective investment and stock exchange listing please click here