Notified Alternative Investment Funds (NAIFs) are a category of collective investment schemes that are exempt from licensing, provided they are included in the list of NAIFs maintained by the MFSA in terms of the Investment Services Act (List of Notified AIFs) Regulations. However, a NAIF is subject to a notification process with the MFSA.

A NAIF is eligible for notification if it satisfies the following conditions:

  1. the NAIF is promoted to Professional Investors and/or Qualifying Investors only;
  2. the NAIF is managed by a full-scope Alternative Investment Fund Manager (AIFM) authorised and regulated under the Directive 2011/61/EC on Alternative Investment Fund Manager (AIFMD);
  3. the board of directors of a NAIF (set up as a SICAV, INVCO, ICC or IC) is to be composed of at least three members, one of whom must be resident in Malta;
  4. at least one of the directors of the NAIF (set up as a SICAV, INVCO, ICC or IC) is independent from the AIFM, the custodian, the promoter and all other service providers appointed by the NAIF and/or the AIFM;
  5. the AIFM assumes responsibility for that NAIF.

It is clear that the NAIF framework is built on the Alternative Investment Fund (AIF) regime and indeed the requirements applicable to AIFs also apply for NAIFs with the additional notification requirements.

The notification process cannot apply for funds which are self-managed; not marketed and sold exclusively to Professional and/or Qualifying Investors; or which engage in loan origination. Furthermore, a NAIF cannot invest in non-financial assets, including real estate.

NAIFs can be established in the following forms:

  • an investment company with variable share capital (SICAV)
  • an investment company with fixed share capital (INVCO)
  • an incorporated cell company (ICC)
  • an incorporated cell of a Recognised Incorporated Cell Company (RICC)
  • a limited partnership
  • a unit trust
  • a contractual fund
Type of Eligible
Qualifying Investors, being investors that fulfil the following criteria: invests a minimum of €100,000 or its currency equivalent in the NAIF which investment may not be reduced below this minimum amount at any time by way of a partial redemption; and b. declares in writing to the AIFM and the NAIF that they are aware of and accept the risks associated with the proposed investment; and c. satisfies at least one of the following: a body corporate which has net assets in excess of €750,000 or which is part of a group which has net assets in excess of €750,000 or, in each case, the currency equivalent thereof;an unincorporated body of persons or association which has net assets in excess of €750,000 or the currency equivalent;a trust where the net value of the trust’s assets is in excess of €750,000 or the currency equivalent;an individual whose net worth or joint net worth with that of the person’s spouse, exceeds €750,000 or the currency equivalent; ora senior employee or director of the NAIF or of a service provider to the NAIF.   Professional Investors, being investors which are considered to be professional clients or may, on request, be treated as professional clients within the meaning of Annex II to MiFID
Minimum Investment€100,000
Compliance OfficerRequired – this function is undertaken by the Compliance Officer of the AIFM   MFSA notification needed for appointment/removal
MRLORequired – this function may be delegated to the administrator of the NAIF or a senior officer of the NAIF   MFSA and FIAU notification needed for appointment/removal

NAIFs must be managed by a full-scope Alternative Investment Fund Manager (AIFM), and be composed of a board of directors of at least three members, one of whom must be resident in Malta and one being independent from the AIFM.

Notification Process

An AIFM must submit a notification request to the MFSA for inclusion of a NAIF or one or more sub-funds of a NAIF in the MFSA’s list of NAIFs. The AIFM submitted this request must either be one that is authorised to provide such services or an AIFM that has passported its services to Malta.

The MFSA will include the AIF in the List of Notified AIFs within 10 working days from filing of the notification. Notified AIFs are not subject to continued supervision by the MFSA as the onus for ongoing supervision lies on the AIFM. However, the MFSA retains discretion with regards to the AIFs that are featured in its list.

For more information or if you have any questions, please feel free to contact Dr Cherise Abela Grech.

Disclaimer This article is not intended to impart legal advice and readers are asked to seek verification of statements made before acting on them.
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