Fri, 27/09/2013 - 10:00
“The combination of promotional initiatives of FinanceMalta together with the support of the industry’s various operators and practitioners has contributed strongly to the growth of Malta’s fund industry as we see it today. If you look at the numbers, we’ve had compelling growth since 2007 in both the number of funds and various service providers,” notes Kenneth Farrugia, Chairman of FinanceMalta.
When FinanceMalta was established in 2007 to actively promote the island on the global stage, the number of Malta-domiciled funds was 214. That figure is now closer to 600.
Malta’s entry to EU membership in 2004 was the primary catalyst for the acceleration of its funds industry; it put “Malta on the map”, says Farrugia who notes a three-pronged growth trend: “On the one hand we’ve continued to see funds being launched in Malta. On the other hand, we’ve started seeing traction on the asset management and asset servicing sides as well. Today there are around 80 Category 2 investment services operations on the island.”
Malta was one of the first domiciles to transpose the AIFM Directive into law, so for managers looking for an attractive EU domicile in which to establish AIFs or PIFs (Professional Investor Funds), which are also passportable under the Directive, the island ticks a lot of boxes.
Having an approachable regulator in the Malta Financial Services Authority (MFSA), as well as being highly cost competitive in terms of setting up and servicing funds in Malta are two important considerations.
“Malta’s value proposition revolves around the highly competitive speed to market. The MFSA is pro-business, and there’s a good consultation process with the industry when new rules and regulations are being drafted. Our size, Europe’s smallest EU member state, plays to our advantage. Depending on the features of the fund being licensed, it takes six to eight weeks for a hedge fund to be approved and much faster for the licence of a sub fund of an existing hedge fund platform,” explains Farrugia, who continues:
“The cost of setting up a hedge fund is on average EUR25,000 with administration servicing fees in the region of EUR15-17,000 per annum for a standard fund with around 50 positions and monthly valuations. Audit fees would be around EUR6-7,000.”
Under the AIFMD, Farrugia is optimistic that Malta will continue to attract a fair share of new funds business “because of the overall positive experience of operators that have set up funds here”.
However, one area that still needs to see meaningful growth is fund custody.
Currently, there are only six custodians on the island. This is partly because the MFSA has been flexible in allowing managers of PIFs to appoint their own independent custodians and prime brokers. In 2017, however, this rule will be revoked and AIFMs will need to use a local depositary.
“Right now, the limited number of Malta custodians is not a weakness because managers have the flexibility to appoint their own custodian. But post-2017, it may be an issue.”
Looking ahead, Farrugia comments: “Despite the turbulence of global markets over the past six years, Malta’s fund industry has managed to register year-on-year growth. We’ve made good inroads and attracted a number of good quality financial services brands to Malta. Going forward, one of our key objectives at FinanceMalta will be to continue to strengthen the visibility of Malta as an international fund domicile outside our shores and to showcase our unique value proposition.”
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