Alternative Investment Funds (AIFs)

Alternative Investment Funds (AIFs)

Alternative Investment Funds (AIFs) are a special class of collective investment scheme which fall within the provisions of the Investment Services Act, 1994 following the transposition of the Alternative Investment Fund Managers Directive (AIFMD) into Maltese law in July 2013.

An AIF is essentially a collective investment scheme which is not licensed as a UCITS fund and is defined as “a collective investment scheme, including sub-funds thereof, which raises capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and which does not qualify as a UCITS Scheme in terms of the UCITS Directive.

In view of the fact that the definition of an AIF captures such a wide variety of fund structures, one would need to look at various factors such as the licensing status and location of the fund manager (where the fund is not self-managed), the sophistication and location of the targeted investor/s, the proposed investment strategies of the fund and the expected level of assets under management (AUM) to be raised within the first 12 to 24 months. Specific rules may apply based on such considerations, which rules would create additional regulatory requirements that would apply to that fund.

Shareholding Structure

Whilst the structuring of any fund will depend upon the promoters’ specific objectives and preferences, typical set-ups would involve the creation of “Voting Shares” issued to the fund’s promoters, providing them with the effective control over the structuring and general operation of the fund, whilst “non Voting Shares” are issued to investors in the fund. Any changes to the rights attaching to the Voting Shares, redemption of such shares, and/or issue of additional Voting Shares will require the prior approval of the MFSA in each case.

Composition of the Fund’s Board of Directors

The Board of Directors of the AIF must be composed of one or more directors independent from the Manager and the Custodian. In practice, however, it is typical for two or more directors having experience in the financial services industry to be appointed, in order to ensure dual control of the fund’s business. In the case of a self-managed fund, clearly this issue of independence between the fund manager and the fund does not exist since the fund will be managed by its own directors and investment committee (if appointed).

The AIF is required to obtain the written consent of the MFSA before the appointment or replacement of a Director. Furthermore, no Corporate Director shall be appointed unless it is regulated in a reputable jurisdiction and the name/s of the person/s who will represent the Corporate Director on the Board of Directors of the AIF are disclosed to the MFSA. In approving prospective Directors of a AIF, the MFSA will, as a matter of procedure, consider:

  1. their collective expertise in matters relating to AIFs;
  2. prior experience of the prospective Directors on fund boards; and
  3. knowledge on matters relating to principles of good corporate governance and regulatory issues.

Fund Management

The management arrangements for an AIF may be structured in one of two ways:

  • Managed by an external fund manager; or
  • A self-managed AIF.

External Manager

Where an external manager is appointed, such manager may be established in Malta or outside Malta. If established in Malta, the proposed manager should be in possession of a Category 2 Investment Services Licence qualifying as an Alternative Investment Fund Manager. Alternatively, an AIF may appoint a European AIFM in accordance with the Investment Services Act (Alternative Investment Fund Manager Passport) Regulations, 2013.

Self-Managed Fund

In the interests of simplifying the structure, it is also possible that the fund is established as a self-managed fund. Doing so would effectively vest responsibility for the discretionary management of the assets of the fund in the Board of Directors. In proposing this structure, the fund will need to satisfy the MFSA that the fund is capable of organising and controlling its affairs in a responsible manner and shall have adequate operational, administrative and financial procedures and controls to ensure compliance with all regulatory requirements and shall provide the MFSA with all the information it may require from time to time.

Where the fund is self-managed, the Board of Directors may consider appointing an Investment Committee which must be composed of at least 3 persons (who shall be expected to satisfy a full “fit and proper” probity check and competence assessment by the MFSA) and which committee shall be collectively responsible for the day-to-day investment management of the assets of the scheme according to the Terms of Reference established by the Board of Directors and approved by the MFSA.

If the self-managed fund route is followed, the initial, paid up share capital for the scheme should not be less than EUR 300,000, or the equivalent in any other currency and the NAV of the Scheme is expected to exceed this amount on an on-going basis.

In cases where the fund is self-managed, the fund must have at least one Director who is an individual resident in Malta and have experience in the field of financial services. GVZH Advocates will be happy to assist you in identifying suitable candidates for this role.

Licensing Process

The MFSA has committed itself to process applications for the authorisation of AIFs within seven working days, provided all relevant documentation has been provided and that all functionaries appointed for the AIF are based and regulated in Malta, the EU, the EEA and other OECD jurisdictions.

With respect to self-managed AIFs, the MFSA shall inform the applicant in writing within 3 months of the submission of a complete application, whether or not the licence has been granted.

An offering document setting out the nature, structure, objectives, risks and functionaries of the AIF must be submitted to the MFSA before being circulated to investors.

Depositary/ Custodian

Every AIF licensed in Malta is required to have a depositary appointed by the AIF and its AIFM which depositary must also be licensed in Malta with a Category 4 a or Category 4b investment services license granted by the MFSA.


The units or shares of AIFs may be marketed in other Member States or EEA States by means of the passporting procedure provided in the applicable rules as transposed from the AIFMD, subject to compliance with the applicable marketing rules in the host Member State and/or compliance with the Prospectus Directive, as applicable.


An AIF may be listed on the Malta Stock Exchange, which is currently the only recognised investment exchange in Malta In doing so, the fund would be able to target certain institutional investors (such as pension funds) which are restricted to acquiring units in listed schemes.

Where an application for admissibility to listing has been submitted concurrently with an application for a Collective Investment Scheme licence, the documents submitted as part of the application for a Collective Investment Scheme licence need not be resubmitted as part of the application for admissibility to listing.

GVZH Advocates offers a comprehensive service, assisting funds with obtaining a listing of their units on the Malta Stock Exchange. For further information about how we can help you with your investment services query, kindly contact us on

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