The Experienced Investor Fund (‘EIF’) regime is similar to professional or sophisticated fund products offered in jurisdictions such as the Caribbean, the Channel Islands, Luxembourg and Ireland.
Since its introduction in 2005, the EIF has been the primary driver behind the growth of Gibraltar’s fund industry, proving a robust and flexible product utilised by both EU and non-EU fund managers. An EIF established under the current EIF Regulations 2012, is a regulated collective investment scheme exclusively for investment by experienced investors. Gibraltar EIFs are designed to invest in a wide range of traditional or alternative asset classes. EIF asset classes typically include tradable securities, commodities, currencies, property, private equity and funds, as well as alternative investments such as structured credit, mortgage tranches, credit loans, venture projects and aircraft. There are no restrictions in law as to the eligible assets classes for an EIF, and there are no diversification requirements within the relevant legislation.Establishing a fund as an EIF presents a number of key advantages:
Common EIF structures include:
EIFs are often structured as open-ended companies. Open-ended funds require constituting documents to allow redemptions of shares at the prevailing Net Asset Value (‘NAV’). Typically, an EIF will issue ordinary shares which carry most of the voting rights and participation shares which carry the economic rights. Participation shares are the units purchased by investors at the NAV price. The ordinary shares are usually issued to the investment manager or to the directors, depending on who manages the fund.An EIF may also be structured as a closed-ended fund which locks in investors for a predetermined length of time, usually subject to one or more extensions. Closed-ended funds are usually used for private equity or property funds where investment is deal-specific rather than being intended to facilitate continuous trading by the fund.
Registration and Operational requirementsOne of the attractions of Gibraltar as a fund domicile is that no regulatory approval is required before a fund can begin to raise capital and commence with its investment activities. Gibraltar is a unique jurisdiction where a fund may be launched based on a legal opinion that confirms the fund has met all legal and structural requirements for its operations, and provided that the fund’s documentation is submitted to the regulator for registration within ten business days of its launch. The majority of Gibraltar funds make use of this preferred route, however, alternative or exotic fund structures and strategies are generally discussed with the regulator ahead of time. An EIF may on the other hand opt for a pre-launch FSC registration where the fund notifies the FSC at least ten days prior to launch. If following ten days of receipt of the documents the FSC does not issue a notice to the applicant, the fund is deemed authorised. The pre-launch registration option is unique and allows the fund to be authorised on the day that it is launched, thereby enabling the manager to define the launch process and timeline with no regulatory uncertainty. Once launched, the fund may immediately begin its activities, including promotion, capital raising and investing. A launch meeting marks the fund’s authorisation and launch. As part of the launch meeting, it is determined that the fund meets all relevant provisions of the EIF regulations and the fund is deemed authorised. At launch the fund’s initial board meeting usually also takes place and the operator agrees that all the necessary contracts are completed allowing the fund to launch under the EIF regime. In order for an EIF to be established in Gibraltar, the fund is required to notify the FSC, as described above, with the following materials:
In essence, a fund is established in Gibraltar through the drafting and approval of the relevant documentation by legal counsel, along with input from the fund directors, administrator, investment manager and other service providers. The FSC does not review nor comment on the documentation prior to the establishment of the EIF. This provides the promoter with greater control over the process, and a fast time to market, all of which is unique to Gibraltar. Following an EIF registration in Gibraltar the FSC may request further documentation or, on certain occasions, amendments to the prospectus. There is however no regulatory downtime to the authorisation of an EIF. If necessary, an EIF can be set up in a matter of days as many of the service providers in Gibraltar can offer turnkey solutions. An EIF has the following key operating requirements:
Marketing of the fundAn EIF can market its shares or units to experienced investors and begin trading from the time the fund is officially launched. Prior to launch, one is permitted to have discussions with professional advisers of potential anchor investors, for example in a private equity fund situation, provided it is made clear that the fund is not available for subscription at that time. Marketing EIFs should always be in accordance with the laws of the jurisdiction in which the fund is being offered.