Malta: Offshore Business Sectors
Investment Fund Management
Investment Funds in Malta are licensed by the Malta Financial Services Centre under the Investment Services Act 1994. Licensed funds are exempt from taxation, although they can choose to pay tax at 25%, in which case generous deductions can be claimed against income and the fund has access to Malta's network of double taxation treaties (see Offshore Legal and Tax Regime and Double Taxation Treaties.)
The investment fund sector in Malta is quite small. However, the growing success of the stock exchange in attracting mutual fund listings may well lead to an increase in the number of funds actually based in Malta.
In January, 2006, the Malta Financial Services Authority licensed its two largest hedge funds up to that point, reinforcing the jurisdiction's emergence as a well-regulated financial services jurisdiction of international stature.
The MFSA granted licences to Altma Fund SICAV plc, which has 29 sub-funds, and NBCG Fund SICAV plc, which has 7 sub-funds, to operate as Professional Investor Funds promoting to Qualifying Investors.
Both schemes have been set up as investment companies with variable share capital in terms of the relevant provisions of the Companies Act.
The newly-licensed funds brought the total of Malta-based, Professional Investor Funds (including sub-funds) to 58, and the MFSA has said that it was considering licence applications from a number of other funds.
The regulator said it was also working on new Professional Investor Fund Guidelines in an effort to improve the existing legislative framework.
In January 2008, Bermuda-based fund administrator, Apex Group announced the launch of a new fund administration subsidiary in Malta.
Apex Fund Services (Malta) was to provide a platform for developing the Group's business in the European Union and surrounding markets, and was expected to begin business shortly after the announcement.
The Apex Group was established in Bermuda in 2003, but now has a presence on three continents, USD5 billion in assets under management, and has been named the second-fastest growing fund administrator in a recent global survey of fund administrators.
The Malta subsidiary is regulated as a recognised fund administrator by the Malta Financial Services Authority under the Investment Services Act.
Apex Malta provides a wide range of fund administration services to traditional funds, fund of funds, hedge funds and private equity funds, with online web reporting access for investors and fund managers through the ApexFundsNet platform, the first of its kind in Malta.
In December 2008, the Maltese Financial Services Authority revealed that newly licensed hedge funds were increasing two-fold on the island, thanks to the jurisdiction's competitive set up costs and recently implemented regulatory measures.
MFSA Chairman Joe Bannister spoke about the increase in funds at a roundtable debate on the subject, where he noted that the Undertakings for Collective Investment in Transferable Securities (UCITS) sector in Malta is also showing signs of further expansion, alongside the fund-servicing and fund administration sectors. The MFSA Chairman also emphasized that Malta’s first priority when it comes to licensing new funds remained quality rather than the quantity.
Among the reasons given for this growth in the investment funds sector was that being part of the European Union has allowed Malta to develop into a fully fledged funds domicile that provides competitive access to the European and international markets.
Bannister stated that the recent updates in legislation have been mainly inspired by developments at EU level and included the implementation of the EU Markets in Financial Instruments Directive (MiFID), the Capital Requirements Directive (CRD), UCITS III, and the new eligible assets regime. This legislation is directed at providing for a more integrated European financial market by allowing EU-based funds and their providers the freedom to compete on a level playing field.
Kenneth Farrugia, Vice-Chairman of FinanceMalta, who also spoke at the meeting, attributed Malta’s success in attracting funds to its high level of cost competitiveness. Citing recent research on the subject, he said: "on a comparative basis Malta is very cost competitive both at the set up stage in terms of setting up costs of a Scheme, as well as regards ongoing servicing costs such as custody and fund administration costs."
In December, 2010, it was announced by the FSA that Deutsche Bank had been granted a Category 4 Investment Services License allowing the bank to provide custody and trustee services for collective investment schemes. “The availability of global custody services is key to the future development of Malta’s financial services sector. Recent events have focused attention on the asset safety aspects surrounding the funds industry and Malta’s efficient re-domiciliation procedures, strong regulatory structures and competitiveness have combined to make it more attractive as an EU fund servicing location. This has in turn put pressure on the demand for custody services and the MFSA has been working intensively for the past year to ensure wider capacity and choice in this area,” the MFSA said.
According to the FSAs annual report, there were a total 113 investment services licences at the end of 2012, four more than at the end of the previous year.