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Onshore shift draws international managers - Apex Fund Services

01 September 2011

Onshore shift draws international managers

opened in Malta in June 2008 and the business has grown in tandem with the development of the jurisdiction as a European fund services hub. Malta’s attractiveness to international asset managers has increased particularly over the past two years with a shift in emphasis toward creating onshore funds that mirror alternative investment strategies previously mostly offered through vehicles domiciled in offshore jurisdictions such as the Cayman Islands and Bermuda.

While Malta is in competition with established European fund centres such as Luxembourg and Dublin, it has the great advantage of significantly lower costs. This has also been an important factor for managers in the wake of the global financial crisis and economic downturn, with investors more cautious about committing capital to alternative funds and cost-effectiveness issues becoming much more important than in the past.

Cost is an important factor in Malta’s emergence as a fund jurisdiction, but far from the only one. While initially it was particularly favoured by managers of smaller funds, often with between EUR5m and EUR10m in assets but sometimes EUR3m at the lower end, average fund sizes have grown larger as the island has increasingly appealed to larger alternative fund managers.

This is down in large part to the proactive attitude of the regulator, the Malta Financial Services Authority, which translates into a quicker and easier set-up and launch process than in other jurisdictions – important in a market environment where time to market is often crucial. If promoters have anti-money laundering checks and due diligence procedures in order, the process of becoming regulated and obtaining a licence can take as little as six to 12 weeks.

For now most fund business coming to Malta is from alternative managers, an across-the-board mix ranging from mainstream hedge fund strategies such as global macro to country- or region-specific investments covering Russia or Eastern Europe, as well as asset classes such as commodities. Most new vehicles are Professional Investor Funds, but more Ucits funds are likely to be established in Malta in the future as the jurisdiction attracts a wider choice of custodian banks.

The growth of Malta’s financial services sector has been assisted by the high standard of education and professional skills available on the island, boosted by the growing links between the industry and the University of Malta. Firms and individuals, including members of the fund sector, are helping to tailor the university’s range of banking and finance courses to the future staffing requirements of service providers.

In addition, the government has played its part by creating a special tax regime for expatriate employees in strategic industries, including the financial sector. The aim is to attract talent from abroad at senior levels who over time will pass on their experience to home-grown high-flyers. This strategy also targets moving beyond fund administration and other services to the eventual nurturing of an investment management community in Malta. The authorities’ long-term strategy is also bolstered by a growing network of double taxation treaties that aid the competitiveness of Malta-domiciled funds.

Unlike other island fund jurisdictions, Malta not only has a bigger population but has more flexibility in areas such as the housing market to accommodate expatriates. It also helps that it offers a high quality of life, including its Mediterranean climate, a good education system, a high-calibre telecommunications infrastructure and good air transport links to the UK and other financial centres around Europe.

 

Anthony O'Driscoll is managing director of Apex Fund Services Malta