The impacts of the Alternative Investment Fund Managers Directive (AIFMD) on the Maltese financial sector

Abstract

This study investigates the impact the Alternative Investment Fund Managers Directive (AIFMD) has made on the Maltese financial services sector following its transposition into Maltese national law on 27th June 2013. With the scope of increasing investor protection and confidence, the AIFMD was also expected to bring about significant changes for local market players, as well as for the fund industry as a whole. This dissertation begins with a literature review as a tool to understand the impacts the AIFMD was expected to have on Malta’s financial services industry. Interviews conducted with a number of individuals who have extensive experience within the local industry made it possible to determine whether the expected impacts actually occurred as well as whether any other unforeseen changes ensued. This allowed for a detailed comparison of the local financial sector pre- and post-AIFMD. The results illustrate that so far, the AIFMD has certainly benefitted investors through improved transparency yet it has also significantly increased costs for market players as a result. The growth and reputation of the financial sector appears to have been affected negatively over the short-term. But given that the AIFMD has not been in force for long, there is still time and the possibility for it to yield further benefits; a view that is strongly endorsed by local entities, who believe that certain benefits have already been gained through features such as the ability to “passport” alternative investment funds (AIFs) throughout the European Union (EU). This study also found that the largest impacts were brought about through the AIFMD provisions which relate to depository requirements, risk management, valuation, transparency and marketing.