October 2016

ASSOCIATION COLUMN: Malta says the future’s bright

After over 12 years of EU membership, Malta is one of the European Union’s success stories. The island has made transformative strides since joining in May 2004, becoming a modern, competitive economy.

Accession opened up Malta to new markets; investment from many multinational businesses, and capital from the EU, has steadily flowed into Maltese businesses and infrastructure projects.

Asset management is one of the key economic sectors that has stood out in this period. Today, Malta is a successful fund services domicile attracting investors and financial entities seeking a dynamic, safe and cost-effective European base.

The asset management industry is supported by a strong operational infrastructure, driven by a network of international financial service providers. The country currently hosts 155 investment management/advisers in the asset management industry and 26 fund administrators, and over 600 funds are authorised by the Malta Financial Services Authority (MFSA).

Maltese legal firms are well versed in establishing corporate vehicles for the funds industry, the preparation of offering documents and the regulatory procedures for licensing. Most are part of international networks such as Lex Mundi, and regularly ranked on Chambers and Martindale Hubbell, among others. The top four global accounting firms also support the industry.

Innovation and responsiveness to rising European trends are primary drivers of the industry’s sustained year-on-year growth. For instance, on July 21 this year, the world’s second Naif (Notified Alternative Investment Fund) was launched in Malta. The launch has enabled Malta to keep up the pace with the evolution of European standards on common investment funds, such as the Luxembourg Raif and the Irish Icav.

The AIFM to the Naif assumes direct responsibility for the due diligence process, and for prospectus compliance with Naif regulations. In so doing, the MFSA will not need to exercise any approval or supervision of the Naif, but will only need to insert the new Naif into its record list, upon receipt of the necessary documentation.

The process is thus considerably sped up, so much so that the regulating entity will only take ten working days to insert the fund in the Naif list. Notably, Naifs do not lose the benefit of being passported in other European countries, empowering Malta with the possibility to become a new international financial centre and target domicile for alternative investment funds.

In the light of Naif peculiarities, the MFSA deemed it appropriate to not include in the facilitation self-managed funds, loan funds, and real-estate funds, while other categories of funds remain eligible, such as private equity funds, which Ventura Sicav is part of (falling under the venture capital specifications). Ventura Sicav breaks with the past by introducing the European Venture Capital (‘EuVECA’) designation to Malta.

The future for Malta’s fund industry is bright. The sector is expanding into niche areas, such as the pensions sector. Malta already hosts 35 retirement schemes, and a growing number of pension managers have based their operations in Malta. 

Another emerging area is e-financial services; it is hoped more online banks, credit card issuers and foreign exchange businesses will base themselves in the country. Malta’s strategic position in the centre of the Mediterranean, with direct links to Europe, North Africa and the Middle East, together with its arbitration infrastructure (including a dedicated centre, and supportive legal regime conforming to international standards) makes the island an ideal venue for international asset managers.

Kenneth Farrugia is Chairman of Malta Funds Industry Association

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