AIFs - Alternative Investment Funds
An alternative investment fund (AIF) is an entity or other type of collective investment scheme where funds are raised from a number of investors with a view to investing them in accordance with a defined investment policy. AIFs may include e.g. hedge funds, private debt funds, private lending funds, private equity funds, and others.
As a rule, AIFs are only marketed to professional customers. If an AIF is marketed to non-professional customers, the alternative investment fund manager (AIFM) must, as a rule, have a national authorisation as referred to in the Directive for AIFM – Alternative Investment Fund Managers, or a similar authorisation granted in another EEA state.
Source: BVAI - Germany.
The AIFMD and Fund Distribution in the EU
The Alternative Investment Fund Managers Directive (AIFMD) was introduced by the EU in 2013. The aim of the Directive is to regulate the provision of funds management services, as well as fund management for all EU member states, by fund managers to alternative investment funds.
As such, it also introduces rules on the marketing of AIFs in the European Union. Malta, being a member of the EU, has fully transposed and implemented the AIFMD which has formed part of Maltese law for over three years.
The AIFMD limits the possibility for non-EU domiciled fund managers to market the funds which they manage to professional investors in the EU. The best scenario for a fund manager to benefit from the passport provided by the Directive is to set up a fund management firm (AIFM) in an EU member state and domicile the fund (AIF) in the same or another EU member state. This would provide the EU AIFM with a full passport and enable such manager to market the AIF without any restriction to professional investors in the EU.
In some cases, an EU AIFM would want to set up the fund outside of the EU for one reason or another. In such cases, such a fund can still be marketed in the EU on a private placement basis and according to the National Private Placement Regimes (NPPRs) in each individual member state; this is not ideal since the NPPRs could vary greatly between one member state and another.
Structuring an Alternative Investor Fund
Any legislative framework permits AIFs to be established using a variety of legal forms, each having characteristics suited for particular needs. An AIF may be set up as:
- A limited partnership or partnership en commandite;
- A unit trust, constituted by a trust deed between a management company and a trustee;
- A mutual fund;
- An investment company with variable share capital (“SICAV”);
- An investment company with fixed share capital (“INVCO”).
- SICAVs can also be established as umbrella funds.
Preferable Fund Jurisdictions
Any legislative framework has its advantages and disadvantages and own characteristics suited for particular needs. However, a regulatory framework is given by the EU-Directive AIFM 2011/2013. We therefore offer dedicated advice to fund structures in