LOAN FUNDS, CELL COMPANIES, DE MINIMIS REGIME: MALTA FASTEST GROWING EU FUND JURISDICTION
Malta’s reputation as a hedge fund domicile was established with the island’s accession to the European Union in May 2004. Malta regularly receives high rankings in benchmarking reports and the World Economic Forum ranks Malta above average for almost every metric in financial market development. Oliver Wyman recently analyzed all European fund domicile jurisdictions, and Malta came out as the one with the strongest growth.
Flexible regulation, transparency and good governance have long been some of Malta’s key advantages, as well as its status as a cost-effective domicile for funds, asset managers, fund administrators and for custodians catering to the thriving fund industry.
Malta’s banking system is well regulated by the Malta Financial Services Authority (MFSA). On 1 May 2004, the Central Bank of Malta joined the European System of Central Banks (ESCB) and on 1 January 2008, it became part of the Eurosystem.
While this Roundtable highlights some of the strong points for Malta like geography, low labor costs, etc., what fund managers and fund promoters are really interested in is how the regulator works. Here Malta stands out for its approachability of the regulator and a strong drive to innovate, obviously within the larger European framework.
Passporting Opportunities for Funds and Fund Managers
EU membership positioned Malta on a level playing field with other European Union countries, and introduced passporting rights so that investment services and UCITS schemes may be registered in Malta and passported to any EU country.
The basic structure used for collective investment schemes is the SICAV, which offers a variable capital nature and the possibility to establish sub-funds. To date, this is the most widely used vehicle, particularly in the non-retail sector and it can be structured to include master feeder funds and umbrella funds with segregated sub-funds.
Professional Investment Funds (PIFs) retain their popular regime, targeted at increasingly financially literate investors. PIFs refer to the Experienced Investor Fund, the Qualifying Investor Fund and the Extraordinary Investor Fund. The PIF regime is a very attractive structure for non-harmonised Funds of 1 and Family Office Funds.
From licensing regime for de minimis managers to Recognised Incorporated Cell Companies, Loan Funds and SME financing
The creation of a new regime for Alternative Investment Funds (AIFs) is one of the biggest recent developments in Malta. But Malta also created a licensing regime for de minimis managers. The MFSA decided to regulate de minimis managers with a stricter regime than what is prescribed in the Directive. In the interest of investor protection and financial integrity, a licensing regime was seen as more preferable than registration.
Malta’s legislation also provides for the setting up of UCITS and non-UCITS retail funds. It has also created a private collective investment scheme structure, in terms of which the private CIS is subject to recognition by the MFSA. These structures are exempt from the AIFMD.
Moreover, a new vehicle was added to Malta’s repertoire of cellular fund vehicles in 2012, called the Recognised Incorporated Cell Company(RICC). Directly targeting fund platform providers, this is a structure which allows the RICC to provide, in exchange for payment of a platform fee, certain administrative services to its Incorporated Cells (ICs). This cell structure is meeting a lot of interest, more and more securitization transactions and structures are now set up in Malta.
In 2014, the MFSA has issued — again, as one of the first jurisdictions in Europe — a Loan Funds regime where funds may originate loans to unlisted companies and SMEs, and may also buy loan portfolios. At the moment the MFSA is working on finding new ways how for SMEs can to go directly to the market and raise funding themselves without having to go to the banks or prepare huge prospectuses. Sometimes the companies only need a little bit of money, and the professional fees will be more than the actual amount of money they need to raise.
The Opalesque 2015 Malta Roundtable, sponsored by Eurex and IDS, took place in May at the office of the MFSA
The group also discussed:
- Why Malta retained the Professional Investor Fund Regime (PIF) after AIMF. Benefits for fund managers.
- Doing business in Malta: High employee loyalty, low comparative costs, diversity of languages
- Malta’s new private equity structure
- Benefits of a real compliance culture
- How to avoid having regulations going against their own objectives
- Who is coming to Malta: An influx of people and companies – educational initiatives, quality of life