Professional Investor Funds (PIFs)

The Professional Investor Fund (PIFs) still plays an important role in Malta’s financial services sector even after the advent of the AIFs. PIFs are collective investment schemes designed for professional and high-net-worth investors and offered to people with a certain degree of expertise, experience and knowledge in their respective positions.

Types of Professional Investor Funds

A Professional Investor Fund (PIF) is a collective investment scheme in terms of the ISA. There are three different types of PIFs:

  • PIFs promoted to experienced investors: with a minimum investment of €10k or equivalent, are subject to some investment restrictions, may be leveraged up to 100% NAV, must appoint a Custodian and issue an Offering Document
  • PIFs promoted to qualifying investors: with a minimum investment of €75k or equivalent, with no investment restrictions (other than in the case of property funds), unlimited leverage, appointment of a Custodian is not mandatory (provided assets are subject to adequate safekeeping arrangements), and must issue an Offering Document
  • PIFs promoted to extraordinary investors: with a minimum investment of €750k or equivalent, with no investment restrictions, unlimited leverage, appointment of a Custodian is not mandatory (provided assets are subject to adequate safekeeping arrangements) and can issue a simplified marketing document in lieu of a more detailed offering document

The underlying assets in which these funds can invest range from transferable securities, private equity, immovable property and infrastructure, to the more complex asset classes pertaining to the world of debt financing and derivatives. Most Maltese PIFs are used for hedge fund set-ups.

Key Features of Professional Investor Funds (PIFs)

Benefits of PIFs

  • Flexibility: Since PIFs are not intended for the general public, but for professional or high-net-worth investors, they are not burdened with the restrictions usually imposed on retail funds. 
  • No Investment or Leverage Restrictions: PIFs benefit from being exempt from any investment or leverage restrictions. 
  • No Diversification Rules: PIFs may be set up to hold one asset. 
  • Custodian: PIFs do not need to appoint a Custodian covering the full suite of custody obligations as it is the case in the retail sector. Adequate safekeeping arrangements for the fund’s assets suffice and are typically provided by Prime Brokers in the case of PIFs investing in listed securities. 
  • Fast-Track Licensing: Provided all documents are submitted to the MFSA, the authority issues an ‘in principle’ approval within two to three months, depending on the complexity of the structure. 
  • Self-Management: PIFs may be self-managed without the need to appoint a third-party manager, meaning promoters can use a selfmanaged fund without the need to have a presence in Malta. 
  • Free Choice of Service Providers: PIFs do not need to appoint a manager, custodian, administrator or any other service provider who is licensed in, or who has otherwise exercised passporting rights into Malta. The MFSA also accepts any service provider licensed in a recognised jurisdiction, such as EU, EEA and OECD members as well as countries with EU- equivalent rules. This allows clients to continue using the services of any external service provider with whom they might already have a professional history. 
  • Shariah-Compliant Funds: Malta offers PIFs compatible with Islamic funding structures and financing vehicles, such as Ijarah and Murabahah funds. 
  • Crypto-Funds: PIFs can be used to set up virtual currency funds.

Licensing Process

The licensing process consists of different phases covering the following: 

  • a preliminary meeting with the MFSA; 
  • submission of application form and supporting documents; 
  • 'fit and proper’ checks and ‘in principle approval’ by the MFSA; 
  • submission of the final approved documentation; 
  • and the completion of any outstanding matters. 

After a licence has been issued, the MFSA may require post-licensing or pre-commencement of business requirements.