Sharia-Compliant Funds

Malta’s fund sector is developing at a remarkable pace and has become one of the finance centre’s key engines for growth. Today, the country hosts almost 600 investment funds which have a combined net asset value of €9.7 billion.

While Malta has a reputation as ajurisdiction for smaller financial services companies and start-ups, the fund sector is maturing and attracting sophisticated asset management activities. Funds which comply with Islamic law can be set up either as Undertakings for Collective Investment in Transferable Securities (UCITS), as Alternative Investment Funds (AIFs) or as Professional Investor Funds (PIFs), which are non-retail funds targeting the more experienced investor.

Ijarah Funds, Commodity Funds and Murabaha Funds, which generally invest in non-conventional asset classes, may only be licensed in Malta as PIFs, whilst Sharia-compliant equity funds can be set up as Maltese UCITS schemes or as PIFs. Considering the restrictions that apply to UCITS funds, Islamic funds may face particular challenges in operating under the UCITS framework, and industry experts believe that Malta’s  framework for PIFs provides a more attractive environment for Sharia funds to work in.

Professional Investor Funds (PIF)

An overwhelming majority of funds in Malta are Professional Investor Funds (PIFs), which are typically in the form of open-ended public or private limited liability investment companies with variable share capital (SICAVs).

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.
 

 


Download your copy of the UCITS Schemes Factsheet


 

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