- UCITS
- Retail Non-UCITS Funds
- Retail AIFs
Each has its own dedicated Malta Financial Services Act Rulebook.
Structure
UCITS are open ended. Retail Non-UCITS funds and Retail AIFs can be open or closed ended.
Retail Non-UCITS Funds
As of June 2020, there were only 5 retail Non-UCITS schemes from only 3 umbrellas.
In a circular issued by the Malta Financial Services Authority on the 26 May 2016, the MFSA confirmed that it will not accept any further applications for retail non-UCITS funds. However, existing licence holders are allowed to continue operating under the current regime.
Retail non-UCITS funds have fallen into disuse in Malta, including because:
- They are now captured under the AIFMD Directive;
- In some cases the investment rules are more onerous than for UCITS (e.g. no use of financial derivatives for investment purposes and leverage); and
- They do not benefit from the UCITS passport to market to the retail investors which this fund-type was originally designed for.
Retail AIFs
Funds for distribution to retail clients can also be authorised as retail AIFs, subject to the AIFMD Directive. These can be marketed to retail investor under Article 43 of the AIFM Directive.
Investment managers managing such funds are subject to the full force of the AIFM Directive.
They are subject to similar investment restrictions as those applicable to retail non-UCITS.
See below for more details.
Investment Rules for Retail Non-UCITS and for Retail AIFs
Below is a summary of the applicable investment and borrowing rules. For full details, visit the Funds-Axis Rules Library.
- Funds cannot invest more than 10% of their assets in securities that are not traded in or dealt on a market which:
o The depositary and manager of the scheme have agreed between themselves as being appropriate for the fund;
o Is listed in the prospectus of the fund;
o Is regulated, operates regularly, is recognised and is open to the public;
o Has adequate liquidity and adequate arrangements in respect of the transmission of income and capital; and
o Is not the subject of a Malta Financial Services Authority (MFSA) restriction. - Non-UCITS funds cannot hold more than 10% of any class of security issued by any single issuer.
- No more than 10% of the assets of a non-UCITS fund can be invested in securities issued by the same body.
- Non-UCITS funds can invest in nil paid or partly paid shares and subscribe for placing or underwriting provided the amount to be paid does not exceed 5% of the value of the scheme (with the exception of where the amount exceeds that figure, cash is not required for other purposes or for the efficient management of the portfolio is available to cover the full amount outstanding).
- A non-UCITS fund and its external manager, considering all of the schemes which the latter manages, cannot acquire sufficient instruments to give it the right to exercise control over 20% or more of the share capital or votes of a company, or sufficient instruments to enable it to exercise significant influence over the management of the issuer.
- No use of financial derivatives for investment purposes and leverage
- The fund can acquire foreign currency by means of a “back to back” loan. Foreign currency obtained in this manner is not classed as borrowing provided the offsetting deposit both:
o Is denominated in the base currency of the fund.
o Equals or exceeds the value of the foreign currency loan outstanding.