Funds in Malta
Malta’s reputation as a hedge fund domicile was established with the island’s accession to the European Union way back in May 2004. The fund industry is one of the Malta financial centre’s main engines of growth.
Flexible regulation, transparency and good governance have long been some of Malta’s key advantages, as well as its status as a cost-effective domicile for funds, asset managers, fund administrators and for custodians catering to the thriving fund industry.
FinanceMalta Sector Guides 2015/16
Malta – Europe’s Funds Gateway
Malta hosts over 580 investment funds which have a combined net asset value of almost €10 billion. While Malta has a reputation as a jurisdiction for smaller financial series companies and start-ups the fund sector is maturing and attracting sophisticated asset management activities.
A Leading Centre for Competitiveness
Malta regularly receives high rankings in benchmarking reports and was named ‘Most favoured domicile in Europe’ for investment funds in the Hedge Funds Review Service Provider Rankings in 2013 and 2014. In addition, the World Economic Forum ranks Malta above average for almost every metric in financial market development.
Passporting Opportunities for Funds and Fund Managers
EU membership positioned Malta on a level playing field with other European Union countries, and introduced passporting rights so that investment services and UCITS schemes may be registered in Malta and passported to any EU country.
Access to the EU & World Markets
EU access opened up many business opportunities between Malta and the EU, as establishing a business in Malta provides instant access to the EU’s internal market of over 500 million people in 28 EU economies. Malta also enjoys excellent relations outside of the EU, specifically with other Mediterranean nations in North Africa and the Middle East, making it an attractive base for European, American or Asian companies wishing to enter the relatively untapped markets to the south. In addition, Malta is a signatory to some 70 double-taxation treaties, covering most of the world’s high-growth markets facilitating international business.
Flexible and Market-Driven Regulation
Malta has established a comprehensive regulatory framework for the registration and marketing of all types of funds and investment vehicles. Malta’s financial services framework and tax laws are up to date with EU directives and in line with EU requirements, while the regulator the Malta Financial Services Authority’s (MFSA) performs its regulatory function in a constructive manner. Operators based in Malta cite the licensing process with the MFSA as being quick, efficient and thorough.
Abiding by the principle of quality over quantity as well as investor protection, the MFSA does not accept just any type of investment funds into Malta, but will readily assist those funds carrying a seal of quality. In this regard, the MFSA carries out regular due diligence on the fund manager, the board of directors and the members of the investment committee. A key benefit is that regulatory and statutory issues may be discussed with the regulator, even at the fund’s gestation stage.
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Portfolio of Fund Options
The basic structure used for collective investment schemes is the SICAV with its variable capital nature and possibility to establish sub-funds within such structure. To date this is the most widely used vehicle, particularly in the non-retail sector and it can be structures to include master feeder funds and umbrella funds with segregated sub-funds.
Professional Investment Funds (PIFs), retain their popular regime targeted at increasingly financially literate investors. PIFs refer to the Experienced Investor Fund, the Qualifying Investor Fund and the Extraordinary Investor Fund. The PIF regime is a very attractive structure for non-harmonised Funds of 1 and Family Office Funds.
The creation of a new regime for Alternative Investment Funds (AIFs) is one of the biggest recent developments to Malta’s fund landscape.
Malta’s legislation also provides for the setting up of UCITS (Undertakings for Collective Investment in Transferable Securities) and non-UCITS retail funds.
Moreover, a new vehicle was added to Malta’s repertoire of cellular fund vehicles in 2012, called the Recognised Incorporated Cell Company (RICC). Directly targeting fund platform providers, this is a structure which allows the RICC to provide, in exchange for payment of a platform fee, certain administrative services to its Incorporated Cells (ICs)
What about the Costs and Benefits?
Freedom to Use Foreign Administrators
An advantage that Malta holds over other domiciles is that funds licensed in Malta, while required to appoint at least one resident director, are not required to appoint a local administrator, although a high percentage of funds still opt to have a Maltese administrator due to the high quality of service offered.
The major banks in Malta have expanded their fund administration and custody business, and, with the World Economic Forum 2014-2015 Global Competitiveness Index positioning Malta within the top 10 with respect to soundness of banks from 134 countries, this could only mean good prospects. Furthermore, several accountancy and law firms have reinforced their specialisation in this field and can therefore provide such services at a higher standard and greater efficiency.
Low Set-up and Operational Costs
The tax structure in Malta also provides a significant incentive. Companies that list securities on the Malta Stock Exchange are not charged with capital gains tax; nor is stamp duty due on the transfer of such shares or securities.
Despite being an EU member, Malta is cost competitive with respect to registrar and listing fees, but also with respect to the renting of office space in prime areas, labour costs and communications expenses.
Furthermore, government’s policy of providing free education to all - from the primary educational years to the top tertiary levels - guarantees a rising number of graduates, particularly in the field of accountancy and law which are two essential professions in the financial services sector.
Key Facts and Figures (2014)
- Total net assets of funds domiciled in Malta (June 2014): €9.7 billion
- Professional Investor Funds (PIF) total net asset value (June 2014): €6.6 billion
- UCITS funds total net asset value (June 2014): €2.42 billion
- Retail Non-UCITS funds total net asset value (2013): €0.7 billion
Management of Collective Investment Schemes (June 2014)
- Over 38% of funds (including sub-funds) domiciled in Malta were managed by Malta-based fund managers
- Around 43% of funds were managed from outside Malta
- Self-managed funds accounted for over 18% of the funds (including sub-funds)
Administration of Collective Investment Schemes (June 2014)
- 74% of the funds domiciled in Malta use local administrators