Investment funds in Malta have increased by 44 per cent since 2007, and now total over 400, according to a recently published Hedgeweek special report entitled ‘Malta Hedge Fund Services 2010’.
The report says that according to HSBC the fund sector in Malta grew by 30 per cent in 2008, 22 per cent in 2009 and 26 per cent in the first quarter of this year alone, despite the national GDP only rising slightly over these periods.
Hedgeweek, a global website, says new fund launches are a major drive of this growth. It quotes Nick Mahy, managing director of Praxis Fund Services as saying: “Start-up managers are looking for a European jurisdiction that is cost-effective given the constraints on smaller funds. Some of the other jurisdictions have grown so large they have taken their eye off the ball.”
Malta’s accession to the European Union in 2004 and adoption of the euro in 2008 solidified Malta’s status as an attractive jurisdiction for funds, the report says.
Hedgeweek says professional investor funds are exempt from Maltese capital gains and income taxes, meaning non-residents are not liable to pay income tax in Malta while benefitting from one of the world’s most extensive double-tax treaty networks with over 50 countries.
It says the attractive regime was devised and continues to be refined by a co-operative effort by the government, the regulator and industry.
Finance Minister Tonio Fenech is quoted as saying: “Regimes become flexible when there is openness and transparency. There has not been any lowering of standards, however, and the engagement of the regulator with the promoters creates meaningful discussion and the adaption of the regime to the requirements of promoters.”
Hedgeweek says the flexibility shown by the Maltese government and the regulator (the Malta Financial Services Authority) is demonstrated in the form that funds can take. While the Sicav is the most popular legal form in Malta, the legal framework allows any of the other forms commonly used in the global funds industry, including limited partnership and unit trust structures.
It points out that the regulator is also piloting a consultation process to enable the creation of contractual mutual funds which are popular in France and other European jurisdictions. Malta, the report says, has gained a reputation for a well-developed infrastructure and services industry and a skilled professional labour force at a competitive operating cost.
Malta’s potential as an international finance centre is also an attraction for many service providers to move here. Praxis Fund Services set up in Malta in October 2008, and Mr Mahy told Hedgeweek: “Cost was a driver, but not the key driver. We thought Malta would expand as a jurisdiction in its own right and that tipped the balance for us.”