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Malta continues to innovate with introduction of securitisation cell legislation

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For London-based managers who are still trying to get their heads around the various machinations of the AIFMD, and where best to set up an EU-regulated fund, help is on its way. 

On 11 June 2015, at Malta House in Piccadilly, home of the Maltese High Commission, a special event hosted by the Malta Business Network will give investment managers an insight into the benefits of setting up an AIFMD-regulated fund in Malta. 

Its timing is rather fortuitous given the continued level of growth in Malta’s funds industry. For managers, especially start-ups, tomorrow’s event will provide the perfect opportunity to get insights from a select cast of high-profile experts. 

The keynote speaker will be Professor Joseph Bannister (pictured), Chairman of the Malta Financial Services Authority (MFSA), the island’s financial regulator. 

The event commences at 6pm and is only available to investment managers. Spaces are limited to 40 to 50 attendees and, most important of all, the event is free to attend. 

There are lots of reasons to be bullish on Malta. Indeed, the fact that it has retained its PIF regime alongside the AIFMD is regarded as the island’s single biggest development in recent memory. 

The island is now home to over 600 MFSA-authorised hedge funds and whilst a number of those are now being transitioned into AIFs to comply the AIFMD, the fact that small and emerging managers can choose whether to run de miminis funds outside the scope of the directive cannot be underestimated.    

James Farrugia, who spearheads the Investment Services & Funds team at GANADO Advocates, told Hedgeweek recently that by running two rulebooks for both the PIF and AIFMD regimes, Malta has a clear competitive advantage over other domiciles.

“Ireland and Luxembourg have taken the decision, rightly or wrongly, that irrespective of whether the AIF is de minimis or not the manager will still be required to appoint a local depositary, a local administrator and so on,” said Farrugia. 

As reported in the Times of Malta last Thursday, Chris Casapinta, the managing director of Alter Domus has warned that the Maltese jurisdiction is growing so fast that practitioners might not have time to keep up “with the exciting options they could offer their clients”. 

Take securitisation: recent legislation has been introduced in respect of securitisation cells to prevent contagion of liabilities from one cell to another, should a cell suddenly implode. 

“It is one of the first structures of its kind available in Europe, so there is naturally considerable interest, especially for investors interested in asset classes like real estate and shipping, which give an annuity,” Casapinta told the Times of Malta. 

In recent times, Malta has seen an uptick in interest among managers choosing to establish a collective investment scheme (CIS) under the PIF regime as a SICAV investment company structure: an umbrella fund with legal segregation between sub-funds, much like securitisation cells referred to above. 

By virtue of the separate patrimony between sub-funds of multi-fund SICAVs the assets and liabilities of one sub-fund will not contaminate the assets of other sub-funds. 

This gives peace of mind to managers who create sub-funds for particular investors who want exposure to a specific strategy and want to be insulated from other strategies of sub-funds of the same SICAV.

Each sub-fund of the PIF can be managed by a different entity (though this is uncommon) – if the manager has, for example, two of the three sub-funds on the SICAV and together with any other funds it is managing its AUM goes beyond the de minimis threshold, then the entire Fund would have to become AIFMD-compliant. In such a scenario, all the sub-funds in the SICAV would need to be managed by the same Manager.
“The safest way for a Fund to stay out of scope of the AIFMD is for the Fund to be self-managed as it will not get ‘contaminated’ by the AUM of the Manager with respect to the other funds they manage. The self-managed PIF is a recent trend that we’ve started seeing in Malta,” Dr Kurt Hyzler, Advocate at CSB Group told Hedgeweek. 

To find out more about the latest developments in Malta and what to think about when establishing a Fund, please click here.

Introductions and speeches will commence at 6.30pm through till 7.30pm. The event will finish at 9.00pm. 

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