Alternative Investing – Benefits of Maltese Hedge Funds

Key Data About Malta

  • Malta became a member state of the EU in May 2004 and joined the Euro Zone in 2008.
  • English is widely spoken and written in Malta and is the principal language for business.

Factors Contributing to Malta’s Competitive Advantage

  • Robust legal and regulatory environment with a legislative framework in line with EU Directives. Malta incorporates both jurisdictional systems: civil law and common law, as business legislation is based on English law principles.
  • Malta boasts a high level of education with graduates representing a cross-section of the various disciplines related to financial services. Specific training in financial services is offered at various post-secondary and tertiary education levels. The accounting profession is well-established on the island. Accountants are either university graduates or in possession of a certified accountant qualification (ACA/ ACCA).
  • A proactive regulator that is very approachable and business minded.
  • An ever-growing supply of high-quality office space for rent at prices cheaper than in Western Europe.
  • Malta’s development as an international financial centre is reflected in the range of financial services available. Complementing the traditional retail functions, banks are increasingly offering; private and investment banking, project finance, syndicated loans, treasury, custody, and depositary services. Malta also hosts several institutions specialising in trade-related products, such as structured trade finance, and factoring.
  • Maltese standard time is one hour ahead of Greenwich Mean Time (GMT) and six hours ahead of US Eastern Standard Time (EST). International business can therefore be managed smoothly.
  • International Financial Reporting Standards, as adopted by the EU, are entrenched in company legislation and applicable since 1997, so there are no local GAAP requirements to deal with.
  • A very competitive tax regime, also for expatriates, and an extensive and growing double taxation treaty network.
  • No restrictions on the granting of work permits for non-EU nationals.

Malta Hedge Funds: Professional Investor Funds (PIF)

Maltese legislation does not directly refer to hedge funds. However, Malta hedge funds are licensed as Professional Investor Funds (PIFs), a collective investment scheme. Hedge funds in Malta are usually set up as open or closed-ended investment companies (SICAV or INVCO).

The Malta Professional Investor Funds (PIFs) regime consists of three categories: (a) those promoted to Qualifying Investors, (b) those promoted to Extraordinary Investors, and (c) those promoted to Experienced Investors.

Certain conditions need to be satisfied to qualify under one of these three categories and therefore to be able to invest in a PIF. PIFs are collective investment schemes designed for professional and high-net-worth investors with a certain degree of expertise and knowledge in their respective positions.

Definition of a Qualifying Investor

A “Qualifying Investor” is an investor who fulfils the following criteria:

  1. Invests a minimum of EUR 100,000 or its currency equivalent in the PIF. This investment may not be reduced below this minimum amount at any time by way of a partial redemption; and
  2. Declares in writing to the fund manager and the PIF that said investor is aware of, and accepts the risks associated with the proposed investment; and
  3. Satisfies at least one of the following:
  • A body corporate that has net assets in excess of EUR 750,000 or part of a group that has net assets in excess of EUR 750,000 or, in each case, the currency equivalent thereof; or
  • An unincorporated body of persons or associations with net assets in excess of EUR 750,000 or the currency equivalent; or
  • A trust where the net value of the trust’s assets is more than EUR 750,000 or the currency equivalent; or
  • An individual whose net worth or joint net worth combined with his/her spouse exceeds EUR 750,000 or the currency equivalent; or
  • A senior employee or director of a service provider to the PIF.

What are Malta PIFs Used for and What are their Benefits?

PIFs are often used for hedge fund structures with underlying assets ranging from transferable securities, private equity, immovable property, and infrastructure. They are also commonly used by funds engaging in cryptocurrency trading.

PIFs offer many benefits, including:

  • PIFs are intended for professional or high-worth investors and do not therefore have the restrictions usually imposed on retail funds.
  • There are no investment or leverage restrictions and PIFs can be set up to hold just one asset.
  • There is no requirement to appoint a Custodian.
  • A fast-track licensing option available, with approval within 2-3 months.
  • Can be self-managed.
  • May appoint administrators, managers, or service providers in any recognised jurisdictions, members of the EU, EEA, and OECD.
  • Can be used to set up for virtual currency funds.

There is also the possibility of re-domiciling existing hedge funds from other jurisdictions to Malta. In this way, the fund’s continuity, investments, and contractual arrangements are continued.

Malta Alternative Investment Funds (AIF)

AIFs are collective investment funds that raise capital from investors and have a defined investment strategy. They do not require authorisation under the Undertakings for the Collective Investment in Transferable Securities (UCITS) regime.  

The recent transposition of the Alternative Investment Fund Directive (AIFMD), through amendments to the Investment Services Act and the Investment Services Rules and the introduction of subsidiary legislation has created a framework for the management and marketing of non-UCITS funds in Malta.

The scope of the AIFMD is broad and covers the management, administration, and marketing of AIFs. However, it mainly covers the authorisation, operating conditions, and transparency obligations of AIFMs and the management and marketing of AIFs to professional investors throughout the EU on a cross-border basis. These types of funds include hedge funds, private equity funds, real estate funds, and venture capital funds.

The AIFMD framework provides a lighter or de minimis regime for small AIFMs. De minimis AIFMs are managers who, whether directly or indirectly, manage portfolios of AIFs whose assets under management collectively do not exceed the following amounts:

1) €100 million; or

2) €500 million for AIFMs managing only unleveraged AIFs, with no redemption rights exercisable within five years from the initial investment in each AIF.

A de minimis AIFM cannot use the EU passporting rights deriving from the AIFMD regime.

However, any AIFM whose assets under management fall below the above thresholds, may still opt into the AIFMD framework. This would render it subject to all of the obligations applicable to full-scope AIFMs and enable it to use the EU passporting rights deriving from the AIFMD.

Additional Information

If you require any further information regarding PIFs and AIFs in Malta, please speak to Jonathan Vassalloadvice.malta@dixcart.com, at the Dixcart office in Malta or to your usual Dixcart contact.

Guernsey ESG Private Investment Funds – Impact Investing and Green Fund Accreditation

A Very Relevant Topic

‘Environmental Social and Governance Investing’ was the keynote speaker topic at both the May 2022 Guernsey Fund Forum (Darshini David, Author, Economist and Broadcaster), and the MSI Global Alliance conference (Sofia Santos, Lisbon School of Economics and Management), which also took place May 2022.

The reason ESG is becoming main-stream is that it is business and therefore economically critical. It also allows financially savvy investors, investment managers, investment advisors, family offices, private equity and the public to financially benefit from staking their financial vote in companies who are looking to better the global status quo.

Repercussions of this Investment Trend

We are seeing two areas of activity driven by these investment trends;

  1. Clients taking ESG positions, within their managed investment portfolios, in companies and funds which have ESG credentials which those clients have a particular affinity for,
  2. Clients establishing bespoke structures to create a tailored ESG strategy which covers their often very specific, areas of ESG / impact investing interest.

The first trend is generally very well catered for, with internal ESG experts and third party investment managers making equity and fund investment recommendations.

Second Trend and Guernsey PIFs

The second trend is more interesting and often involves the establishment of special purpose structures, which can be a registered and regulated fund, for a small number of (generally less than 50) investors. The Guernsey Private Investment Fund (PIF) is ideally suited to these new, bespoke ESG strategy funds.

In particular, we are seeing family office and private equity investors with very specific and niche areas of ESG investment interest, who are just not catered for by main-stream ESG funds.

Guernsey Green Fund Accreditation

Guernsey ESG PIFs can also apply for Guernsey Green Fund accreditation.

The objective of the Guernsey Green Fund is to provide a platform upon which investments into various green initiatives can be made.  This enhances investor access to the green investment space, by providing a trusted and transparent product which contributes to the internationally agreed objective of mitigating environmental damage and climate change.

Investors in a Guernsey Green Fund are able to rely upon the Green Fund designation, provided through compliance with the Guernsey Green Fund Rules, to present a scheme that meets strict eligibility criteria of green investing and has the objective of a net positive outcome for the planet’s environment.

Additional Information

For further information on ESG investing through bespoke structures, Guernsey Private Investment Funds and the Guernsey Green Fund accreditation please contact: Bruce Watterson or Steve de Jersey, in the Dixcart office in Guernsey: advice.guernsey@dixcart.com.

Dixcart is licensed under the Protection of Investors (Bailiwick of Guernsey) Law 1987 to offer PIF administration services, and holds a full fiduciary license granted by the Guernsey Financial Services Commission.

Migration of Fund Management Companies – Guernsey’s Fast Track Solution

Global Transparency

The ongoing country-by-country assessment and global scrutiny of standards of transparency and financial regulation by the OECD and FATF, has brought a welcome improvement in global standards but at the same time, has highlighted deficiencies in some areas.

This can create compliance issues for existing arrangements and investor concern for structures operating from certain jurisdictions. On occasion, there is therefore, a need to relocate financial activities to a more compliant and stable jurisdiction.

Guernsey’s Corporate Solution for Investment Funds

On 12 June 2020, the Guernsey Financial Services Commission (GFSC) introduced a fast-track licensing regime for investment managers of overseas (non-Guernsey) funds.

The fast-track solution allows overseas fund management companies to migrate to Guernsey and obtain the required investment business licence in just 10 business days. As an alternative, a newly incorporated Guernsey management company can also be established and licensed within 10 business days, under the same regime.

The fast track solution was developed in response to a significant number of enquiries from managers of overseas funds, wishing to establish funds in Guernsey, whether through the migration of existing overseas fund managers or the establishment of new funds requiring Guernsey fund managers.

Why Guernsey?

  • ReputationFund managers are attracted to Guernsey due to its strong legal, technical, and professional services infrastructure, with a wide choice of quality lawyers, fund administration firms and locally based directors. In addition, Guernsey is in the EU, and is FATF and OECD “white listed” for tax transparency and fair taxation standards.
  • International ComplianceGuernsey has introduced legislation to meet EU requirements on economic substance. This legislation requires fund managers to carry out their core income generating activities in their jurisdiction of tax residence. Guernsey’s pre-existing financial services infrastructure and regulatory framework means that fund managers established on the island are able to meet the requirements on economic substance. Guernsey’s robust yet balanced regulation of fund managers and its longstanding pedigree and reputation as a world leading jurisdiction in private equity are also key to Guernsey’s popularity.
  • ExperienceFund administrators and auditors in Guernsey have extensive experience in working with overseas non-Guernsey funds. Non-Guernsey schemes, for which some aspect of management, administration or custody is carried out in Guernsey, represented a net asset value of £37.7 billion at the end of 2020, and is a growth area.
  • Other fast-track solutionsThe fast-track option for managers of overseas funds is in addition to the existing fast track licensing processes available for Guernsey managers of Guernsey funds (also 10 business days). There is also a fast-track option for registering Guernsey funds within 3 business days for registered funds, and 1 business day for private investment funds (PIFs) and the PIF Manager.

Dixcart Fund Administrators (Guernsey) Limited works closely with Guernsey legal counsel, to facilitate migrations and provide high quality on-going support and administration services to ensure compliance with regulatory requirements, economic substance, and best practice.

Additional Information

For more information regarding the fast tracking of funds to Guernsey, please contact Steven de Jersey or Bruce Watterson at the Dixcart office in Guernsey: advice.guernsey@dixcart.com

Guernsey

Guernsey Fund Summary

As an additional aide to our notes on the introduction of the two new Private Investment Fund (PIF) routes in Guernsey (Qualifying Private Investor and Family Relationship);

A Quick Guide to Guernsey’s New Private Investment Fund (PIF) Rules (dixcart.com)

The ‘Qualifying’ Private Investor Fund (PIF) Guernsey Private Investment (dixcart.com)

A summary Is provided below on the three routes to establishing a PIF and, for completeness, the same information for registered and authorised funds.

* Flexible entity type: such as Limited company, Limited partnership, Protected Cell Company, Incorporated Cell Company etc.
** No hard definition of ‘family relationship’ is provided, which could allow for a wide range of modern family relationships and family dynamics to be catered for.

Additional information:

Registered vs authorised – in registered collective investments schemes it is the responsibility of the designated manager (administrator) to provide warranties to the GFSC that appropriate due diligence has taken place.  On the other hand, authorised collective investment schemes are subject to a three-stage application process with the GFSC in which this due diligence takes place.

Authorised fund classes:

Class A – open-ended schemes compliant with the GFSCs Collective Investment Scheme Rules and thus suitable for sale to the public in the United Kingdom.

Class B – the GFSC devised this route to provide some flexibility by allowing the GFSC to exhibit some judgment or discretion.  This is because some schemes range from the retail funds aimed at the general public via institutional funds to the strictly private fund established solely as a vehicle for investment by a single institution, and that their investment objectives and risk profiles are similarly wide-ranging. Accordingly, the rules do not incorporate specific investment, borrowing and hedging restrictions. This also allows for the possibility of new products without the need to amend the Commission’s regulation.  Class B schemes are typically aimed at institutional investors.

Class Q – this scheme is designed to be specific and is aimed at professional investor funds encouraging innovation.  As such, compliance with this scheme places more focus on disclosure of risks inherent in the vehicle vs other classes. 

Dixcart is licensed under the Protection of Investors (Bailiwick of Guernsey) Law 1987 to offer PIF administration services, and holds a full fiduciary license granted by the Guernsey Financial Services Commission.

For further information on private investment funds, please contact Bruce Watterson or Steve de Jersey at advice.guernsey@dixcart.com

Malta

The Various Types of Investment Fund in Malta

Background

A series of European Union Directives implemented in July 2011 allow collective investment schemes to operate freely throughout the EU, on the basis of a single authorisation from one member state.

Characteristics of these EU regulated funds include:

  • A framework for cross-border mergers between all types of EU regulated funds, allowed and recognized by each member state.
  • Cross-border master-feeder structures.
  • Management company passport, which allows an EU regulated fund, established in one EU member state, to be managed by a management company in another member state.

Dixcart Malta Fund Services

From the Dixcart office in Malta we provide a comprehensive range of services including; accounting and shareholder reporting, corporate secretarial services, fund administration, shareholder services and valuations.

The Dixcart Group also offers fund administration services in: Guernsey, the Isle of Man and Portugal.

Investment Fund Types and Why Malta?

Since Malta joined the EU, in 2004, the country has enacted new legislation, and introduced additional fund regimes. Malta has been an attractive location to establish a fund ever since.

It is a reputable and cost-effective jurisdiction, and also offers multiple types of fund to choose from, depending on the preferred investment strategy. This provides flexibility and an ability to adapt to different circumstances.

Currently, all funds in Malta are regulated by Malta Financial Services Authority (MFSA). Regulation is divided into four different types:

  • Professional Investor Fund (PIF)
  • Alternative Investor Fund (AIF)
  • Notified Alternative Investment Fund (NAIF)
  • Undertakings for Collective Investment in Transferable Security (UCITS).

The Professional Investor Fund (PIF)

The PIF is the most popular hedge fund in Malta. Investors usually use this type of fund to achieve strategies linked to innovation, for example investment into cryptocurrency, as the main features of the fund are flexibility and efficiency.

PIFs are known as collective investment schemes designed to target professional investors and high net worth individuals, due to the lower investment, asset threshold and experience required, compared to other types of fund.

To create a PIF the investor must be a Qualified Investor and must invest a minimum of €100,000. The fund may also be created by setting up an umbrella fund which includes other sub-funds within it. The invested amount can be established per scheme, instead of per fund. This method is often viewed as being the easier option by investors, when creating a PIF.

Investors must sign a document stating their awareness and acceptance of the risks involved.

The Qualified Investor must be; a body corporate or a body corporate which is part of a group, an unincorporated body of persons or association, a trust, or an individual with assets of more than €750,000.

A Maltese PIF scheme can be formed by any of the following corporate vehicles:

  • An Investment Company with Variable Share Capital (SICAV)
  • An Investment Company with Fixed Share Capital (INVCO)
  • A Limited Partnership
  • A Unit Trust/Common Contractual Fund
  • An Incorporated Cell Company.

The Alternative Investor Fund (AIF)

An AIF, is a Pan-European collective investment fund, for sophisticated and professional individuals. It can also be created as a multi-fund where the shares may be divided into different types of shares, in that way creating sub-funds of the AIF.

It is called ‘collective’ because many investors can take part in it and any  benefit is distributed across the fund investors in accordance with a defined investment policy (not to be confused with UCITS which have stricter requirements). It is termed ‘Pan-European’ because the AIF has an EU passport and therefore any EU investor can join the fund.

When it comes to investors, these may be Qualifying Investors or Professional Clients.

A ‘Qualifying Investor’, must invest a minimum €100,000, declare in a document to the AIF that he/she is aware of and accepts the risks that he/she is about to take, and finally, the investor must be; a body corporate or a body corporate which is part of a group, an incorporated body of persons or association, a trust, or an individual with assets of more than €750,000.

An investor who is a ‘Professional Client’ must have the experience, knowledge and skill to make his/her own investment decisions and to evaluate the risks. This investor type is generally; entities who are required/authorised/regulated to operate in financial markets, other bodies such as national and regional governments, public bodies that manage public debt, central banks, international and supranational institutions, and other institutional investors whose main activity is to invest in financial instruments. In addition, clients that do not meet the definitions above, may request to be Professional Clients.

A Maltese AIF scheme can be formed by any of the following corporate vehicles:

  • An Investment Company with Variable Share Capital (SICAV)
  • An Investment Company with Fixed Share Capital (INVCO)
  • A Limited Partnership
  • A Unit Trust/Common Contractual Fund
  • An Incorporated Cell Company.

The Notified Alternative Investor Fund (NAIF)

The NAIF is a Maltese product used by investors when they want to market their fund, within the EU, in a fast and efficient way.

The manager of this fund (Alternative Investment Fund Manager – AIFM), assumes all of the responsibility for the NAIF, and its obligations. Following ‘notification’, the AIF can access the market in ten days, as long as all of the documentation received by the MFSA is in good order. Securitisation projects are an example of what NAIFs are used for.

Within this fund, as in an AIF, investors can be Qualifying Investors or  Professional Clients. Either can apply for the process of ‘notification,’ with the only two requirements being;  investors must each invest a minimum of €100,000, and they must declare to the AIF and AIFM, in a document, that they are aware of the risks that they are about to take and that they accept them.

Relevant features of a NAIF include:

  • Subject to a notification process by MFSA, rather than to a license process
  • Can be open or close ended
  • Cannot be self-managed
  • Responsibility and supervision are undertaken by the AIFM
  • It cannot be set-up as a Loan Fund
  • Cannot invest in non-financial assets (including real estate).

A Maltese NAIF scheme can be formed by any of the following corporate vehicles:

  • An Investment Company with Variable Share Capital (SICAV)
  • An Investment Company with Fixed Share Capital (INVCO)
  • An Incorporated Cell Company of a SICAV (SICAV ICC)
  • An Incorporated Cell of a Recognised Incorporated Cell Company (RICC)
  • A Unit Trust/Common Contractual Fund.

Undertakings for Collective Investment in Transferable Security (UCITS)

UCITS funds are a collective investment scheme, a liquid and transparent retail product which can be marketed and distributed freely across the EU. They are regulated by the EU UCITS Directive.

Malta offers a cost-effective option, with flexibility, whilst fully respecting the EU Directive.

UCITS, created in Malta, can be in the form of a variety of different legal structures. The main investments are transferable securities and other liquid financial assets. UCITS can also be created as an umbrella fund, where the shares can be divided into different types of shares, thereby creating sub-funds.

Investors must be ‘Retail Investors,’ who must invest their own money in a non-professional way.

A Maltese UCITS scheme can be established by any of the following corporate vehicles:

  • An Investment Company with Variable Share Capital (SICAV)
  • A Limited Partnership
  • A Unit Trust
  • A Common Contractual Fund.

Summary

A variety of different funds are available in Malta and professional advice, from a firm such as Dixcart, should be taken, to ensure that the fund type selected best meets the particular circumstances and types of investor investing into the fund.

Additional Information

If you require any further information regarding funds in Malta, please speak to Jonathan Vassallo: advice.malta@dixcart.com, at the Dixcart office in Malta or to your usual Dixcart contact.

Green Finance Investing and the Guernsey Green Fund

‘ESG’ and Green Finance Investing – the Guernsey Green Fund

Environmental, social and governance (‘ESG’) and Green Finance investing have risen to the top of regulatory and investor agendas, as the strong momentum to act as better-engaged, more pro-active custodians of global ESG change continues.

This change is being delivered through the financial services landscape.

Delivery, Strategy and Expertise

Institutional, family office and sophisticated private investor strategies are evolving to include greater elements of ESG investment – but how are those investment opportunities being delivered?

Private and institutional investment houses and family offices continue to create expert advisory teams to guide their ESG strategies and to offer these strategies and  expertise to a wider population of investors, through new and existing fund structures.

For new investor groups, be they institutional, family office or other, looking to directly control and deliver their own bespoke ESG strategies, a fund structure is the globally accepted norm for delivery.

The Guernsey Green Fund Credibility

In 2018 the Guernsey Financial Services (‘GFSC’), published the Guernsey Green Fund rules, creating the world’s first regulated green investment fund product.

The objective of the Guernsey Green Fund is to provide a platform upon which investments into various green initiatives can be made.

The Guernsey Green Fund enhances investor access to the green investment space by providing a trusted and transparent product that contributes to the internationally agreed objectives of mitigating environmental damage and climate change.

Investors in a Guernsey Green Fund are able to rely on the Guernsey Green Fund designation, provided through compliance with the Guernsey Green Fund Rules, to represent a scheme that meets strict eligibility criteria for green investing and has the objective of a net positive impact on the planet’s environment.

Delivering a Guernsey Green Fund

Any class of Guernsey fund can notify of its intention to be designated a Guernsey Green Fund; whether registered or authorised, open-ended or closed-ended, providing it meets the eligibility criteria.

The GFSC will designate Guernsey Green Funds on its website and authorise the use of the Guernsey Green Fund logo to be used on its various marketing and information materials (in accordance with the GFSC’s guidelines on logo use). An appropriate fund can therefore clearly display its Guernsey Green Fund designation and compliance with the Guernsey Green Fund Rules.

The GFSC is currently in the process of registering the Guernsey Green Fund logo as a trade-mark with Guernsey’s Intellectual Property Office website.

Dixcart Fund Services in Guernsey

We see the lighter-touch, closed-ended, Guernsey Private Investment Fund structures as being particularly attractive to family offices and managers of sophisticated private investor groups, seeking to take direct control of and deliver bespoke ESG investment strategies.

We work directly with expert legal advisers and investment managers to deliver, manage and administer fund structures.

Additional Information

For further information on Dixcart Fund Services in Guernsey and where to start, please contact Bruce Watterson or Steve de Jersey, in the Dixcart office in Guernsey: advice.guernsey@dixcart.com.

Malta Funds – What Are The Benefits?

Background

Malta has long been an established choice for fund managers seeking to set-up in a reputable EU jurisdiction whilst being cost-effective.

What Type of Funds Does Malta Offer?

Since Malta became an EU member in 2004, it has incorporated a number of EU fund regimes, most notably; the ‘Alternative Investment Fund (AIF)’, the ‘Undertakings for the Collective Investment in Transferable Securities (UCITS)’ regime, and the ‘Professional Investor Fund (PIF)’.

In 2016 Malta also introduced a ‘Notified Alternative Investment Fund (NAIF)’, within ten business days of completed notification documentation being filed, the Malta Financial Services Authority (MFSA), will include the NAIF on its online list of notified AIFs of good standing. Such a fund remains fully EU compliant and also benefits from EU passporting rights.

EU Collective Investment Schemes

A series of European Union Directives allow collective investment schemes to operate freely throughout the EU, on the basis of a single authorisation from one member state

Characteristics of these EU regulated funds include:

  • A framework for cross-border mergers between all types of EU regulated funds, allowed and recognised by each member state.
  • Cross-border master-feeder structures.
  • Management company passport, which allows an EU regulated fund established in one EU member state to be managed by a management company in another member state.

Dixcart Malta Fund Licence

The Dixcart office in Malta holds a fund licence and can therefore provide a comprehensive range of services including; fund administration, accounting and shareholder reporting, corporate secretarial services, shareholder services and valuations.

The Benefits of Establishing a Fund in Malta

A key benefit of using Malta as a jurisdiction for the establishment of a fund is the cost savings. The fees for establishing a fund in Malta and for fund administration services are considerably lower than in many other jurisdictions. 

The advantages offered by Malta include: 

  • An EU Member State since 2004
  • A highly reputable financial services centre, Malta was placed among the top three financial centres in the Global Financial Centres Index
  • Single regulator for Banking, Securities and Insurance – highly accessible and robust
  • Regulated quality global service providers in all areas
  • Qualified professionals
  • Lower operational costs than other European jurisdictions
  • Quick and simple set-up processes
  • Flexible investment structures (SICAV’s, trusts, partnerships etc.)
  • Multilingual and professional work-force – an English-speaking country with professionals usually speaking four languages
  • Fund listing on the Malta Stock Exchange
  • Possibility of creation of umbrella funds
  • Re-domiciliation regulations are in place
  • Possibility of using foreign fund managers and custodians
  • The most competitive tax structure within the EU, yet fully OECD compliant
  • An excellent network of double taxation agreements
  • Part of the Eurozone

What are the Tax Advantages of Establishing a Fund in Malta?

Malta has a favourable tax regime and a comprehensive Double Tax Treaty network.  English is the official business language, and all laws and regulations are published in English.

Funds in Malta enjoy a number of specific tax advantages, including:

  • No stamp duty on the issue or transfer of shares.
  • No tax on the net asset value of the scheme.
  • No withholding tax on dividends paid to non-residents.
  • No taxation on capital gains on the sale of shares or units by non-residents.
  • No taxation on capital gains on the sale of shares or units by residents provided such shares/units are listed on the Malta Stock Exchange.
  • Non prescribed funds enjoy an important exemption, which applies to the income and gains of the fund.

Summary

Maltese funds are popular due to their flexibility and the tax efficient features that they offer. Typical UCITS funds include equity funds, bond funds, money market funds and absolute return funds.

Additional Information

If you require any further information regarding establishing a fund in Malta, please speak to your usual Dixcart contact or to Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com

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Introduction to Bruce Watterson – Dixcart Guernsey, a Member of our Funds Team

This month we would like to introduce Bruce Watterson. He is delighted that the Dixcart office in Guernsey was licensed in May 2021, and now provides Private Investment Fund (PIF) administration services.

Bruce Watterson

Director

MSc FCA TEP

bruce.watterson@dixcart.com

Bruce Watterson manages a portfolio of structures for high net worth clients, acting as corporate director, trustee and adviser, as is appropriate. In today’s fast changing international business landscape, working closely with top tier professional tax advisers, lawyers and fellow accountants is a key strength of his approach.

Increasingly he is identifying fund solutions to meet the different demands of his varied portfolio of clients.

Bruce holds degrees in Geology and Geotechnical Engineering, is a Fellow of the Institute of Chartered Accountants in England and Wales and a qualified Trust and Estate Practitioner.

Bruce provides services to corporations, individuals and families from all around the world, with a high number of clients in India and Sub-Saharan Africa. His extensive network of professional contacts is particularly strong in the UK. 

He is expert in a number of international service areas including;

  • establishment of trusts and foundations for estate, succession planning, asset protection and wealth management structures
  • commercial and residential property projects including; special purpose vehicle company  incorporation, property acquisition, project development and financing
  • mining and mineral exploration structures from top holding company down to operations company management
  • Private equity and Private Investment Fund structures, side structures for carried interest, securitisation and structured product structures
  • listed company services,
  • payroll structures
  • company migrations, and
  • economic substance planning

Bruce joined Dixcart in the Isle of Man in 2008, where as well as having a portfolio of clients, he was also responsible for business development. He moved to the Dixcart office in Guernsey, to join the Board, during 2010.

In his spare time Bruce actively supports Guernsey Round Table (President 2017-18) and is thereby heavily involved with community and fund raising efforts. He also enjoys spending time with his family, getting out and about and enjoying Guernsey’s fantastic scenery either running, cycling or swimming. Reading and cooking, when time allows.

Malta Funds – What Are The Benefits?

Background

Malta has long been an established choice for fund managers seeking to set-up in a reputable EU jurisdiction whilst being cost-effective.

What Type of Funds Does Malta Offer?

Since Malta became an EU member in 2004, it has incorporated a number of EU fund regimes, most notably; the ‘Alternative Investment Fund (AIF)’, the ‘Undertakings for the Collective Investment in Transferable Securities (UCITS)’ regime, and the ‘Professional Investor Fund (PIF)’.

In 2016 Malta also introduced a ‘Notified Alternative Investment Fund (NAIF)’, within ten business days of completed notification documentation being filed, the Malta Financial Services Authority (MFSA), will include the NAIF on its online list of notified AIFs of good standing. Such a fund remains fully EU compliant and also benefits from EU passporting rights.

EU Collective Investment Schemes

A series of European Union Directives allow collective investment schemes to operate freely throughout the EU, on the basis of a single authorisation from one member state

Characteristics of these EU regulated funds include:

  • A framework for cross-border mergers between all types of EU regulated funds, allowed and recognised by each member state.
  • Cross-border master-feeder structures.
  • Management company passport, which allows an EU regulated fund established in one EU member state to be managed by a management company in another member state.

Dixcart Malta Fund Licence

The Dixcart office in Malta holds a fund licence and can therefore provide a comprehensive range of services including; fund administration, accounting and shareholder reporting, corporate secretarial services, shareholder services and valuations.

The Benefits of Establishing a Fund in Malta

A key benefit of using Malta as a jurisdiction for the establishment of a fund is the cost savings. The fees for establishing a fund in Malta and for fund administration services are considerably lower than in many other jurisdictions. 

The advantages offered by Malta include: 

  • An EU Member State since 2004
  • A highly reputable financial services centre, Malta was placed among the top three financial centres in the Global Financial Centres Index
  • Single regulator for Banking, Securities and Insurance – highly accessible and robust
  • Regulated quality global service providers in all areas
  • Qualified professionals
  • Lower operational costs than other European jurisdictions
  • Quick and simple set-up processes
  • Flexible investment structures (SICAV’s, trusts, partnerships etc.)
  • Multilingual and professional work-force – an English-speaking country with professionals usually speaking four languages
  • Fund listing on the Malta Stock Exchange
  • Possibility of creation of umbrella funds
  • Re-domiciliation regulations are in place
  • Possibility of using foreign fund managers and custodians
  • The most competitive tax structure within the EU, yet fully OECD compliant
  • An excellent network of double taxation agreements
  • Part of the Eurozone

What are the Tax Advantages of Establishing a Fund in Malta?

Malta has a favourable tax regime and a comprehensive Double Tax Treaty network.  English is the official business language, and all laws and regulations are published in English.

Funds in Malta enjoy a number of specific tax advantages, including:

  • No stamp duty on the issue or transfer of shares.
  • No tax on the net asset value of the scheme.
  • No withholding tax on dividends paid to non-residents.
  • No taxation on capital gains on the sale of shares or units by non-residents.
  • No taxation on capital gains on the sale of shares or units by residents provided such shares/units are listed on the Malta Stock Exchange.
  • Non prescribed funds enjoy an important exemption, which applies to the income and gains of the fund.

Summary

Maltese funds are popular due to their flexibility and the tax efficient features that they offer. Typical UCITS funds include equity funds, bond funds, money market funds and absolute return funds.

Additional Information

If you require any further information regarding establishing a fund in Malta, please speak to your usual Dixcart contact or to Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com

Guernsey

Guernsey Expands Their Private Investment Funds (PIF) Regime to Create a Modern Family Wealth Structure

Investment Funds – For Private Wealth Structuring

Following consultation with industry in 2020, the Guernsey Financial Services Commission (GFSC) has updated its Private Investment Fund Regime (PIF), to expand the available PIF options. The new rules became effective on 22 April 2021 and immediately replaced the previous Private Investment Fund Rules, 2016.

Route 3 – the Family Relationship Private Investment Funds (PIF)

This is a new route that does not require a GFSC Licensed Manager. This route enables a bespoke private wealth structure, requiring a family relationship between investors, to be created, which must fulfil the following criteria:

  1. All investors must either share a family relationship or be an “eligible employee” of the family in question (an eligible employee in this context must also meet the definition of qualifying private investor under Route 2 – the Qualifying Private Investor PIF);
  2. The PIF must not be marketed outside the family group;
  3. Capital raising from outside the family relationship is not allowed;
  4. The fund must have a designated Guernsey Administrator, licensed under the Protection of Investors (Bailiwick of Guernsey) Law 1987, appointed to it; and
  5. As part of the PIF application, the PIF Administrator must provide the GFSC with a declaration that effective procedures are in place to ensure that all investors fulfil the family requirement.

Who Will this Vehicle be of Particular Interest To?

No hard definition of ‘family relationship’ is provided, which could allow for a wide range of modern family relationships and family dynamics to be catered for.

It is anticipated that the Route 3 PIF will be of particular interest to ultra-high-net-worth families and family offices, as a flexible structure through which to manage family assets and investment projects.

A New Approach to Modern Family Wealth Management

The recognition of traditional trust and foundations structures varies across the world, depending on whether the jurisdiction recognises common law or civil law. The separation between legal and beneficial ownership of assets is often a conceptual stumbling block in their use.

  • Funds are recognised globally as well regarded and well understood wealth management structures and, in an environment of increasing demand for regulation, transparency and accountability, provide a specifically registered and regulated alternative to traditional tools.

The needs of modern families and family offices are also changing and two considerations which are now particularly common are:

  • The need for greater legitimate control, by the family, over decision making and assets, which can be achieved by a representative group of family members acting as the board of directors of the fund management company; and;
  • The need for wider family involvement, particularly next generation, which can be outlined in a family charter attached to the fund.

What is a Family Charter?

A family charter is a useful way of defining, organising and agreeing attitudes and strategies to matters such as environmental, social and governance investing and philanthropy.

The charter may also formally outline how family members can be developed in terms of education, particularly on family financial matters, and their involvement in the management of the family wealth.

The Route 3 PIF offers bespoke and highly flexible options for dealing with different strategies of wealth distribution and management across the family.

Separate classes of fund units might be created for different family groups or family members, reflecting respective levels of involvement, differing family situations, and differing income and investment requirements. Family assets might be pooled, for example, in separate cells within a protected cell company fund structure, to allow management of different asset classes by specific family members and the segregation of different assets and investment risk across the families’ wealth.

The route 3 PIF can allow a family office to build and evidence a track record in investment management.

Dixcart and Additional Information

Dixcart is licensed under the Protection of Investors (Bailiwick of Guernsey) Law 1987 to offer PIF administration services, and holds a full fiduciary license granted by the Guernsey Financial Services Commission.

For further information on wealth, estate and succession planning and the establishment and administration of family private investment funds, please contact Bruce Watterson or Steve de Jersey at advice.guernsey@dixcart.com