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Choosing the right fund structure in Malta

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For emerging managers, the fact that Malta retained its PIF regime alongside the new AIF fund regime means that a number of fund structuring opportunities now exist.

The most popular option, to date, has been for managers to register with the MFSA, obtain a fund management licence and launch a de minimis PIF. But according to Kevin Caruana (pictured), Managing Director of Custom House Global Fund Services (Malta) and David Barry, Head of Sales & Business Development, EMEA, there are other viable options to consider.
 
These include a de minimis self-managed PIF or the opportunity to join a pre-established multi-fund SICAV platform.
 
The self-managed PIF, in particular, is becoming an interesting trend.
 
“It is an option we are seeing more interest in,” confirms Barry. “Under this structure, the board of directors is responsible for the discretionary management of the assets of the fund. The Board may appoint an investment committee who will be responsible for the day-to-day management of the assets according to the terms set out by the Board.”
 
At least one board director needs to be resident in Malta and may act as the Compliance and Money laundering officer. Also, board meetings must take place on a quarterly basis.
 
“There is no regulatory obligation on the portfolio manager to be based in Malta. What’s important for the MFSA is that they have a contact point in Malta that is responsible for the fund irrespective of where the portfolio manager is. The MFSA has always adopted a cautious approach. It wants peace of mind that the parties are reputable and fit and proper,” explains Caruana.
 
The self-managed PIF is an alternative solution for managers who want to build a track record but do not necessarily want to go through the rigorous regulation process of setting up a regulated asset management company. It initially caters to a limited number of private investors e.g. friends and family. What should be noted, however, is that asset raising maybe a challenge given that there is no regulated investment manager.
 
Which is where the second option becomes interesting: the pre-established SICAV platform. Here, any manager wanting to run a sub-fund under an umbrella structure must be regulated in a jurisdiction approved by the MFSA. Another difference to note is that these are sub-funds and not standalone funds, so you need to operate under the terms and conditions of the platform.
 
Custom House was one of the first to offer such a platform in Malta when it launched its Nascent Fund SICAV plc in 2010. There are currently six managers running sub-funds on the platform, each of which is fully segregated to protect against other managers potentially imploding.
 
“This turnkey solution helps managers establish a fund in a cost efficient manner. The idea is that we provide them with the infrastructure and assistance to allow them to grow. As their AuM increases, they can then choose to “fly the nest” and launch their own fund, retaining their full track record,” confirms Barry.
 
The provider running the umbrella structure takes care of all the operational and regulatory aspects of running a fund. In that sense, working under a SICAV structure provides guidance to the manager on regulation and compliance.
 
Whether managers choose a self-managed PIF or join a platform like Nascent will be determined by how they structure themselves internally: “Regulated or unregulated? Non-AIF or AIF? These are probably the first and most important questions a manager needs to answer,” concludes Barry. 

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