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As the dust settles from the Brexit referendum, fund managers will be continuing to review their distribution options should the UK leave the EU on unfavourable terms. In particular, they will be keen to maintain the opportunity for funds to be acceptable to investors inside the European Union.

Although a great deal of uncertainty continues to cloak the eventual outcome for managers, it is worth exploring the options currently open to those seeking to launch funds in European jurisdictions that will stay in Europe.

One such country is Malta. In discussions with clients, I continue to find many asset managers working on the understanding that their choices for an EU-friendly cross border launch pad can be distilled down to a choice between Ireland and Luxembourg.

Malta is a sovereign EU member state which has implemented the EU’s fund passporting directives. It has a solid regulatory environment, overseen by the Malta Financial Services Authority (MFSA). The menu of options in terms of available structures in Malta is continuing to expand rapidly, and we are even aware of fund managers moving their portfolio management activities to the island and setting up regulated investment management entities in Malta.

The MFSA continues to innovate, and its latest structure for funds, the Notified Alternative Investment Funds framework, saw the light of day earlier this summer.

The NAIF retains the passporting benefits to the rest of the EU, and addresses the need that some firms have of a swift authorisation process. Indeed, NAIFs do not require authorisation from the MFSA, and in return, cannot be sold to retail investors. Firms establishing a NAIF will need to be meet the criteria being an EU / EEA Alternative Investment Fund Manager (AIFM).

NAIFs can make use of any structure currently available under Maltese law, and the AIFM will be expected to assume full responsibility for the NAIF vehicle.

How do you launch a NAIF in Malta?

Currently, AIFMs in the EU / EEA can submit an application to the MFSA to have their Alternative Investment Fund (AIF) added to the regulator’s list of notified AIFs. Currently, third country AIFMs (e.g. United States, Hong Kong) will have to await granting of third country passporting rights to their jurisdiction. At time of writing, the timescale for this was still somewhat obscure, and subject to a number of reciprocal regulatory issues.

Once a formal application has been submitted to the MFSA, funds should be able to join the list of notified AIFs in Malta within 10 business days.

Fund managers outside the EU/EEA may wish to consider establishing an AIFM in Malta, or can make use of the license of an existing AIFM on the island. The other option is to look at other EU jurisdictions, but the UK in particular is currently subject to regulatory uncertainty as the government considers its negotiating position vis-à-vis an eventual ‘Brexit’.

For more information on fund structures in Malta, please contact Graham May, Head of Structuring, Hawksmoor Parters – graham@hawksmoorpartners.com

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