Posted on 10 January 2019
Malta’s Growing Appeal to Foreign Investors
Foreign investment in Malta is on the rise, with many foreign investors finding Malta the ideal jurisdiction for domiciling their funds. Malta appeals to those seeking the benefit of working with a flexible regulator with an English-speaking Anglo-Saxon culture.
Przemyslaw Koger, Director and Head of Relationship Management in Malta, says that “Malta is hungry for new names and new funds, so they’re often keen to work with smaller funds and smaller managers. This is very different than other European countries where smaller funds fail to gain much traction.”
Investments in Malta are streaming in from around the world, and in particular, Polish investors are continuing to turn to this small island nation for new investment opportunities. In November 2018, the Polish Foreign Minister, Jasek Czaputowicz, revealed to TMV that “Polish investors showing an interest in Malta are increasing every year.”
Many foreign investors are utilizing Malta’s Notified Alternative Investment Fund structure, or NAIF, to take advantage of its speed to market. NAIFs do not require licenses, authorizations, or approvals. Instead, they require that the regulator be aware of their existence. Simply, these are unregulated funds that are managed by a regulated manager.
According to Przemyslaw, Malta is the ideal location to set up such structures. “In Malta, a NAIF is the absolute quickest way to have an AIF operative in the market, requiring only 10 business days between the date of filing and the first date of operation.
“When the NAIF structure first rolled out in 2016, we saw initial interest from those familiar with Malta who had already established a presence or had past experience using Malta as a domicile. But over time, we expect to see a more diverse range of clients coming to take advantage, as the NAIF structure becomes available to third country AIFMs when their established country is granted passporting rights under the AIFMD. The wealth of opportunity will undoubtedly continue to grow and we look forward to assisting clients in taking full advantage.”
Optimal Onshore Flexibility
The Maltese regulator, the Malta Financial Services Authority (MFSA), supervises the fund manager and allows the AIF itself to be notified. By regulating and supervising the manager rather than the fund itself, the due diligence and accountability of assessing fund documentation is shifted from the fund to the AIFM, who assumes full responsibility for the fulfillment of obligations related to the NAIF, without being subject to ongoing supervision.
“The MFSA has successfully struck the difficult balance between effective oversight and ease of doing business with the NAIF regime,” Przemyslaw argues. It’s quicker, more straightforward and more cost effective than its other European counterparts, yet still remains fully compliant with European Union law.”
A Range of Structural Options
NAIFs have a range of benefits but one of the most commonly overlooked is the sheer number of asset strategies which apply to these vehicles. Investments can range from more traditional to alternative investments. The fund can be open or closed-ended and can be established as any of the various structures permitted under Maltese law, including SICAV, limited partnerships, and many others.
While NAIFs are unregulated, they do require certain safeguards, including an AIFMD compliant depositary to perform oversight duties, as well as cash monitoring and safekeeping. All other obligations arising in terms of the AIFMD must also be undertaken, for example due diligence on the members of the governing body of the fund. According to Przemyslaw, these are all services that Alter Domus is increasingly providing to clients who are taking advantage of this flexible investment opportunity.
Although still relatively new, Notified Alternative Investment Funds in Malta are secure, flexible fund structures that were intentionally created to appeal to the changing needs of investors and fund managers from around the world. Przemyslaw and his team at Alter Domus Malta are excited to assist clients as they continue to exploit this unique opportunity.