Malta - Professional Investor Funds gain traction
Malta has come a long way as a fund jurisdiction since it joined the EU in 2004. Through June 2015, Malta had 146 licenced entities holding Category 1A (advisory), Category 3A and Category 4A licences. In terms of growth trends, one interesting observation is that the number of retirement schemes being established in Malta is on the rise. There are 35 such retirement schemes currently, compared to 11 in 2013. In addition, Malta is home to some 14 retirement scheme administrators, illustrating that the international pensions space is gaining traction.
With respect to the fund management operational infrastructure, Malta is home to 27 fund administrators and is well represented by the main international accounting firms as well as multiple first-class law firms. The island has a buoyant banking and insurance sector, a trust and pensions sector, and along with its funds industry, has been growing in the region of 25 per cent per year, based on the MFSA's latest figures.
"In terms of the number of funds, we've predominantly seen traction in PIFs (Professional Investor Funds)," states Kenneth Farrugia (pictured), Chairman of FinanceMalta. "We've had 35 new PIFs licenced through June 2015. In addition, we've seen four AIFs licenced this year and, interestingly, eight UCITS schemes licenced in the first six months compared to 11 in total for 2014. So we're seeing good growth across a range of fund categories."
This is no doubt helped by the flexibility of Malta's fund structuring framework, fund promoters have the choice of complying with the PIF rulebook, the AIF rulebook under AIFMD, or the UCITS rulebook. Farrugia says that retaining the PIF regime, following the introduction of AIFMD two years ago, "was an important policy decision taken by the MFSA as some promoters want to remain de minimis and out of scope of the Directive.
"That said, we are seeing fund managers with AUM below EUR100 million still opting to be regulated under the AIFMD. Being regulated under the Directive infers a degree of quality and good governance within the fund structure, which institutional investors will likely favour."
From a fund structuring perspective, the self-managed PIF is one that continues to attract certain promoters to Malta.
The structure is ideal for those wishing to avoid setting up as their own AIFM. Rather than then establish a standalone fund structure, appoint a board of directors to the manager, and take full discretionary control of the fund strategy, a self-managed PIF is more of a collaborative affair whereby the fund strategy is controlled by an investment committee; typically this will be a small number of select investors including the promoter, to whom the portfolio management could be delegated. In all instances, there is no management company involvement.
Most European jurisdictions now only offer the AIF regime meaning that there's a risk to crowding out new fund managers. As a jurisdiction, Farrugia says it is important for Malta to keep all options on the table for managers.
"Why shut down the ability for small managers to remain out of the Directive? With the PIF regime, we are able to support fund managers who don't necessarily want to be fully registered under AIFMD from day one," stresses Farrugia, who adds in conclusion: "Managers need clarity, and this depends on having access to the regulator to get unequivocal information on what is required when setting up a fund operation. Malta stands out highly in this regard with the accessibility of the MFSA being one of the pivotal and critical success factors to Malta's success, so far."