Collective Investment Schemes (CIS) - Malta Investment Funds

AIFMD News Update: Distinguishing between Open and Closed-Ended Funds

17 Jul 2014

2 min read

When the AIFMD was adopted, no harmonised definition of “closed-ended” Alternative Investment Funds (“AIFs”) was provided within the Directive’s text. To this end, on 17th December 2013, following submission of draft standards by ESMA, the European Commission adopted the regulatory technical standards (“RTSs”) intended to determine whether an AIFM is an AIFM of open-ended AIF(s) and/or closed-ended AIF(s). The said RTSs were published in the Official Journal of the European Union on the 24 June 2014.

The RTS provide that an AIFM of a closed-ended AIF is an AIFM which manages an AIF other than an open-ended AIF. An open-ended AIF is, in turn, defined as an AIF which repurchases or redeems its shares or units with its investors, at the request of any of its shareholders or unit holders, prior to the commencement of its liquidation phase or wind-down out of the assets of the AIF and does so according to the procedures and frequency set out in its rules or instruments of incorporation, prospectus or offering documents.

This definition is critical primarily because different rules on liquidity management and valuation apply to Alternative Investment Fund Managers (“AIFMs”) depending the specific AIFs they manage- closed ended funds are clearly  granted more permissive minimum liquidity requirements and also less frequent valuations.  Managers will undoubtedly welcome these guidelines to ensure the proper application of the AIFMD rules to their day-to-day business.

For further information about how GVZH Advocates can assist with the application of the AIFMD to your business or with any other financial services requirements kindly contact us here.