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Why Malta Funds?

Many of our clients increasingly choose to set up in Malta. Malta is one of 5 major EU funds jurisdictions and on a list that includes Luxembourg, Dublin, Gibraltar and Cypress (Jersey, Guernsey and Isle of Mann are not in the EU). For small seed funds and increasingly for management companies, Malta is regarded as the best EU jurisdiction to set up in for the following reasons:

  • Malta fund and investment management company set up and operational costs are relatively low,
  • Fund and investment management company set up times are comparatively quick though the process is thorough, funds can be set up within 2-3 months or less,
  • There are a significant number of international fund administrators and all top four accountancy firms,
  • Funds can be set up as self-managed by individuals forming an Investment Committee, which means a management company is not needed. Fund can also be externally managed by an investment management company. The self-managed option saves time and costs of setting up a management company,
  • Funds include 3 types of Professional Investor Funds (PIFs, with minimum investment -10k, 75k, 750k in fund base currency; leverage limits apply for 10k (experienced PIFs)), UCITS and ICC structures,
  • Funds can benefit from AIFMD or opt out where they qualify,
  • Malta is not in the Financial Transition Tax (FTT) zone,
  • funds are exempt from corporation tax and there is no withholding tax on distributions to investors,
  • Malta fund can list or list share classed on the Malta Stock Exchange in an technical or trading listing for comparatively low cost and with relatively quick turnaround times,
  • The effective rate of tax on management companies is 5% and they can be passported into other EU countries regulator-regulator,
  • Managers moving to Malta may benefit from a special 15% effective rate of income tax,
  • The jurisdiction has over 50 double tax treaties,
  • The jurisdiction is credible, it is not a tax haven, it has never been black listed by the OECD or tainted by matters affecting EU & other funds jurisdictions,
  • The regulator of Malta fund, the Malta Financial Services Authority (MFSA) is highly regarded,
  • Start-up managers get significant time and attention from counterparties and the regulator,
  • The weather and food is great! And it's about a 2 hrs. flight from London and 1/2 hour boat ride from Italy.

Who else is there?

Malta is increasingly winning business from Luxembourg and Cayman. Funds have re-domiciled to Malta from Cayman and Luxembourg amongst other jurisdictions. Malta is now home to billion dollar funds and fund of funds alongside million dollar funds. It remains the port of call for small seed funds but the sector is now established winning battles for major business. A list of funds domiciled in Malta can be found at www.mfsa.com.mt.

What is the downside?

Malta has a lack of major banks which makes it less attractive for UCITS funds. The exit of HSBC from much of the funds business in Malta and worldwide is disappointing. Deutsche Bank remains as a major brand in Malta but the minimum AUM is relatively high. Bank of Valletta, which uses JP Morgan as global custodian and Sparkasse Bank offer credible local options. That said, PIF funds for professionals can use any credible bank or prime broker in a recognised jurisdiction outside Malta. This means that the lack of top banks in Malta has no impact on the PIF sector. Most clients use banks or PB's in London or other EEA jurisdictions for a Malta Fund.

Lack of investor familiarity with Malta can be an issue. However, investors are increasingly aware of the jurisdiction and the EU is increasingly a general brand for all its jurisdictions. Our experience and that of our manager clients is that once investors learn about Malta Fund they have no issue with the jurisdiction and it has never been a reason in our experience for investors to withhold investments. The fact banks for PIFs can be located outside Malta and bank and PB diversification can be effected may be relevant to investors post Cypress. As Malta is in the EU it is also possible to passport funds if needed.

How does Malta compare to other EU funds jurisdictions?

In brief.

  • Luxembourg. Malta Fund is significantly more cost effective than Luxembourg funds and can also offer high quality counterparties (the same counterparty can be 3 times more expensive in Lux) and Malta is not a tax haven. However Luxembourg is a better known longer established funds jurisdiction and this can count for investors, it also has more major banks.
  • Dublin. Set up times for management companies and funds are generally significantly quicker in Malta and it has not suffered in the financial crisis in the same manner.
  • Cypress. The swoop on banks has affected confidence in Cypress, however for some funds, e.g. those investing into India; Cypress remains an option for treaty reasons.
  • Gib. Gibraltar is no longer black listed by the OECD however there have been issues in fund set up and operation in the jurisdiction, including involving litigation in relation to money misappropriated. That said for certain types of funds Gibraltar remains a viable option but not a leading one.
  • We rate Luxembourg as the overall No 1 EU funds jurisdiction and Malta as No 2. However, for small seed professional investor funds we rate Malta Fund as No 1 funds jurisdiction as operational costs are highly significant for smaller funds and they often get better counterparty and regulator support in Malta.

How does Malta compare to Caribbean funds jurisdictions?

Malta Fund is competitive on set up and operational costs with Caribbean funds jurisdictions such as Cayman. In addition Cayman and other Caribbean management companies are not always recognised in the EU and may also be viewed as tax avoidance structures unless there is real substance and managers should take detailed professional tax advice on this before proceeding as laws are now more rigorous.

For EU based managers there are significant disadvantages of Caribbean funds which include: (i) time difference, your counterparties are in a very different time zone and you overlap for limited periods, this creates significant operational risk and if you are instructing their EU offices you risk tax substance, (ii) to ensure substance is in a jurisdiction you need to really operate from there and be able to travel there, this is more expensive and time consuming with Caribbean funds, (iii) benefits of being in the EU in terms of marketing and passporting are lost, (iv) some investors, including EU institutional investors, will not invest in Caribbean based funds. While we set up Caribbean funds, we do not usually recommend them for EU based managers.

Why HFH?

HFH are the leading experts in Malta fund. We have been setting up funds in Malta since the sector opened. We are familiar with the counterparties and have worked extensively with the regulator. Our counterparty relationships mean we get discounted rates and better terms for clients. We lead on bringing different types of funds to Malta, from private equity and derivatives to FX and equity strategies, and have played a key role in developing the funds sector.

HFH is the only firm in Malta that has lawyers with blue-chip backgrounds and over 10 years funds experience, who have trained at top 10 global law firms in the world's leading financial centres.  Our lawyers act as directors, compliance officers and MLRO's of Malta fund. HFH is the only firm with small seed fund expertise. In addition, every client setting up a fund or management company in Malta gets the benefit of our advisory, counterparty and marketing services included; this delivers a better more tailored product to managers and investors. 

Contact Us to Get a Quote for a Malta fund or management company.

Email  ak@hedgefundhotel.co.uk

 

 


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