The Malta Financial Services Authority has launched a new structure for onshore hedge funds, the notified alternative investment fund (NAIF) which is being touted as a serious challenge to similar initiatives already introduced in Ireland, and soon to be introduced in Luxembourg.

Malta, Ireland and Luxembourg already had structures to cope with hedge funds. But these were considered to be over-regulated, and the fund authorisation process was seen as being “frustrating”, in the words of various fund management opinion pieces.

All jurisdictions are compared to the Cayman Islands, which is seen as being the best one for hedge fund vehicles, with over 1,000 funds launched there every year.

Ireland responded last year with the Irish Collective Asset-management Vehicle, which has been an success with fund managers – with 150 funds already launched.

Luxembourg is planning its alternative investment fund structure in the coming months, based on allowing alternative investment fund managers authorised in any EEA state to access the fund markets through passporting.

All jurisdictions are compared to the Cayman Islands

This would therefor bypass the costs and delays associated with having to get further local regulatory input.

In this context, the Maltese structure has been described by an international legal advisory firm as “shrewd “The Maltese NAIF is definitely good news for those considering a hedge fund structure there. It will without question be significantly easier to launch a hedge fund there and in light of the developments in Ireland and Luxembourg, creation of this new regime seems like a shrewd move by the regulator,” Simmons and Simmons said in a note to investors.

“One of the biggest challenges for the Maltese structure will be mass market appeal. On paper it makes sense; the taxation regime is favourable; there is a growing service provider capability and the MFSA is widely viewed as being a business-friendly regulator.

“The NAIFs challenge, however, will be to make itself a mass market challenger, particularly for those with US allocators who may not be as familiar with Malta as a European jurisdiction, even when compared to Ireland and Luxembourg.”

Another international organisation, Dechert, which encompasses limited liability partnerships in different jurisdictions, also praised it as a vehicle which would make it quicker for new European funds to come to market.

Under the new regime, the fund manager would make a notice filing with the MFSA but – rather than there being a separate regulation of both the fund and the manager – the MFSA will rely solely on the regulated status of the manager.

The MFSA anticipates receiving requests for the List of Notified AIFs in the coming weeks.