Gibraltar is a member of the European Union by virtue of its relationship with the UK. As a member of the EU, Gibraltar benefits from full passporting rights in respect of insurance, investment services and in respect of investment funds under the UCITS and AIFMD directives.
Experienced Investor Funds (EIFs)
The EIF regime was introduced in 2005 and updated in 2012 and 2018. They require a Gibraltar authorised Administrator and two Gibraltar Financial Services Commission (GFSC) authorised directors to ensure appropriate governance. The EIF auditor must also be a Gibraltar firm, but there is freedom on the choice of depository services and investment manager and there is no limit on the number of investors, making these vehicles very attractive for hedge fund managers based elsewhere in Europe and the US. EIFs are designed for investors who are investment professionals or who are high net worth individuals, with at least EUR 1million in net assets. More commonly, they are available for those investors who can commit a minimum investment of EUR 100,000, or when advised by a regulated advisor, a minimum of EUR 50,000. For investors in existing funds re-domiciling to Gibraltar as EIFs, other limits may be accepted. EIFs enjoy a streamlined process for establishment and registration, simply requiring either a post notification to the Regulator by the Administrator within 10 days of commencing operations, or a pre-notification process, whereby the Regulator undertakes to respond within 10 days. This notification has to be accompanied by an opinion from a Gibraltar lawyer that the EIF and its formation and offer documents comply with the EIF regulations. An EIF fund can set its own remit for its investment strategy and policies, provided that these are set out clearly in its offer document, along with all applicable risks and disclosures.
A Private Fund is a collective investment scheme that is ideally suited to small groups of friends or family or for someone looking to test his strategy without the full range of regulation. Private funds are restricted to promoting the fund to no more than 50 investors who must comprise a known group of people at the outset. Unlike the EIF, Private Funds do not need to apply for registration with the Regulator and neither are they obliged to appoint formal counterparties, such as a depositary, administrator, resident directors or an investment manager. This allows private schemes to be set up cost-effectively and quickly. However, the absence of regulation translates into the restrictions on the marketing of such funds. Many schemes commence life as a private fund, but convert to an EIF at a later stage if successful, in order to benefit from increased marketing exposure and additional governance provisions.
Undertaking for Collective Investment in Transferable Securities (UCITS)
Under its Collective Investments Schemes legislation, Gibraltar has enacted all the European Union directives necessary for the establishment of retail UCITS. including UCITS IV. This will enable UCITS management companies to use their management passport to potentially manage Gibraltar domiciled UCITS, which can be set up as either feeder or master funds. The tax efficiencies of Gibraltar also make it a desirable location from which to establish a UCITS management company. A UCITS fund established in Gibraltar can passport its activities to other EU member states. Non UCITS retail funds may also be authorised in Gibraltar and are capable of being individually recognised by other member states on a reciprocal basis for the promotion of its shares.