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Andrew Frankish, director, IDS Fund Services Malta

Out of Africa into the European market

As South Africa’s leading alternative fund administrator, it was logical for the IDS Group to look to extend its services to Europe. The firm was examining the traditional options of Luxembourg and Dublin – when a meeting with Prof. Joe Bannister, head of the Malta Financial Services Authority, started the process that resulted in IDS setting up an office in Malta in the spring of 2010.

It’s not surprising that so many fund managers, promoters and service providers cite the welcoming and accommodating attitude of the MFSA as an important factor in the decision to establish funds in Malta. IDS found the regulator to be open and approachable, and the process of establishment and licensing was smooth and efficient.

More than a year later, the Maltese business has some USD250m in assets under administration, with new business coming less from pure start-ups than from established managers looking to create European-domiciled funds in parallel with their offshore vehicles. Many of these managers are testing out the European market, not only in terms of investor demand but the regulatory regime and the calibre of service providers, but in the longer term we and Malta look forward to attracting some of the big-name managers that will give the jurisdiction momentum to start building assets more rapidly.

The established strength of the IDS Group in South Africa, particular as a reputed administrator of funds investing throughout the African continent, has probably helped in attracting an important source of new business for the Maltese operation. Since 2010 the firm has been able to service the international funds of existing clients, including Cayman-domiciled vehicles, and this has been the biggest area of growth over the past year.

Managers see IDS as a specialist in handling the particular characteristics of Africa-focused funds and look to the group as a trusted partner when they decide to move into the European marketplace – although the political turbulence this year has temporarily put a brake on what had been growing interest in the North African region.

All the funds serviced by IDS in Malta and that are domiciled in the island are regulated under the Professional Investor Fund regime and follow classic hedge fund strategies, although there are also a number of private equity vehicles. In addition to Africa, we are seeing extensive interest from Middle East promoters targeting European markets, and the firm’s future marketing efforts will also focus on Switzerland and Liechtenstein, where awareness of the capability offered by Malta is growing.

There’s no doubt about the island’s advantages as a fund servicing centre, with its highly-educated, English-speaking workforce, extensive availability of accounting and legal skills, technological infrastructure and easy access to the main European business centres. All the building blocks are in place for Malta to grow into the major fund centre for the Mediterranean region, and this potential is increasingly translating into concrete business.

Getting Malta’s name established among managers and promoters throughout the world is a key element in this process, because the fund industry has traditionally exhibited a herd mentality, sticking to familiar service providers and jurisdictions. But the island’s cost-competitiveness is an important argument: it offers the same levels of qualifications and skills as Luxembourg and Dublin, but at a significantly lower cost. With the number of fund administrators growing, the industry as a whole has the expertise to compete on a global scale.

Andrew Frankish is director of IDS Fund Services Malta

Please click here to download a copy of the Hedgeweek Special Report: Malta Hedge Fund Services 2011


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