ISOLAS LLP has welcomed changes to Gibraltar’s fund legislation designed to allow alternative investment funds (AIFs) to opt-out of the Alternative Investment Fund Managers Directive (AIFMD) framework established by the EU and applicable in Gibraltar notwithstanding Gibraltar’s exit from the EU.
Gibraltar’s fund regime is primarily modelled on the EU’s AIFMD framework, which requires alternative investment fund managers (AIFMs) with assets under management in excess of €100 million, or €500 million if the AIF is closed-ended and unleveraged, to be subject to the full requirements of AIFMD which includes various obligations in respect of regulatory capital, conduct of business, remuneration, transparency, disclosure as well as the appointment of a depositary.
The new Dual Funds regime, announced today, introduces significant changes to the requirements placed on AIFs operating within Gibraltar and enables internally managed experienced investor funds (the Gibraltar category of fund for high net worth individuals and institutional investors) with assets under management that exceed the thresholds set by the EU to opt out of the AIFMD regime. In addition, external AIFMs will be able to apply for experienced investor funds which they manage to be exempt from specified fund-related provisions.
Internally managed experienced investor funds and external AIFMs now have flexibility to elect whether to continue operating under EU standards or to opt out of this framework, into a regime which is less prescriptive but which complies with high international regulatory standards, and which is similar to other leading hedge fund domiciles.
Under the new regime, funds that choose to opt out of AIFMD framework will no longer be required to appoint an external depositary. Therefore, the prescriptive functions and operating conditions to which these depositaries are subject under AIFMD, which were designed with traditional financial instruments in mind, will no longer apply. This will create opportunities, in particular for digital asset investment funds, to continue to grow within a framework that has been designed to accommodate the specific custody requirements that apply to digital assets.
Jonathan Garcia, Partner at ISOLAS, said: “These regulatory changes are great news for the funds sector in Gibraltar, particularly for our high performing crypto funds, where regulatory competitiveness is key. Until now, these high performing crypto funds have been boxed into a regime formulated for an analogue age, which imposes operational barriers that are extremely difficult, if not impossible, to reach. The new regime removes these unnecessary regulatory hurdles and establishes a framework that will enable these high performing funds to continue to grow and flourish within a framework that complies with international standards.”
HM Government of Gibraltar Press Release