A favourable environment for start-up managers
Q&A with Ivan Grech, Chief Operations Officer, FinanceMalta
What are the key trends currently driving growth and development within Malta’s funds industry?
Malta has always been attractive in the alternative space for the small-medium sized managers, thanks to the introduction of the Professional Investor Fund Regime, alongside various advantages including cost efficiencies, a pro-business regulator, time-to-market consideration, etc; factors which together create the right environment and render the Maltese jurisdiction an interesting and compelling one, particularly for alternative managers.
Furthermore, with what seems to be an increasing investor preference to opt for onshore regulated structures, we are receiving a number of enquiries from funds in offshore jurisdictions such as Cayman and BVI looking into redomiciliation options into a more regulated and robust environment. Malta here remains an attractive option not only for reasons such as those mentioned above, but also for the tried and tested seamless redomiciliation process which allows for the continuation of a fund in Malta with no loss of track record and no need for investors to redeem and re-subscribe, which may otherwise give rise to a fiscal event.
How are these trends impacting your jurisdiction’s objectives?
Our objectives as a jurisdiction remain to maintain Malta as a jurisdiction of choice in the funds and asset management sector, providing a high quality service, ensuring the utmost satisfaction of all clients. What this means for us is that we must remain at the forefront in responding to changes in demands within the industry, and accordingly adapting efficiently.
The presence of a high number of quality service providers present on the island also means that there is a healthy level of competition between such providers. With no less than 20 administrators present in Malta, this means that all must work hard to constantly remain on top of the game in the services that are provided in order to maintain a competitive edge over other jurisdictions.
How has the global focus on regulation and good governance impacted the services and business conducted by operators in Malta?
Regulation, particularly in the financial services sector, is constantly changing and developing. Some may argue that we are indeed in a state of over-regulation, but nonetheless adherence to any and all such regulatory developments is beyond fundamental. Malta as a jurisdiction has always been at the forefront in implementing any regulation and changes therein directed at EU level, often being one of the very first member states to transpose such directives into local legislation.
The same too goes for service providers and operators in Malta, who must ensure a swift response to such global focus on regulation in order to maintain competitive advantage, both as a jurisdiction as well as at individual operator level, adapting one’s service offering to cater for these new changes and ensuing related demands.
What changes have you observed in client needs in Malta? Which have been the most significant and how have you responded to these new demands?
Being an attractive domicile particularly for the small to medium sized market, Malta is often home to a number of first-time, startup managers who would have a background and experience in the investment and asset management sectors, but not necessarily in the setting up, launching and managing of an entire fund scheme. For this reason, the service provisioning of local operators goes beyond simply providing a basic service, but there is a lot of handholding and support to be given to such managers.
Fund administrators have responded to such demand by ensuring they remain available to provide the necessary support to clients. This is particularly evident in the initial stages from setting up of the fund operation in Malta, handling the entire process with the client, legal team, Regulator, and all involved parties up until the eventual licensing of the fund.
Can you outline the primary challenges your clients in Malta are facing at the moment and how your services are helping them overcome these difficulties?
Undoubtedly the greatest challenges facing all players across all industries and jurisdictions over the past few months has been the COVID-19 pandemic, and all the uncertainties surrounding these unprecedented times. We were able to provide our clients with support in this regard by continuing to provide an uninterrupted service, while simultaneously and seamlessly making the move to remote working, following the guidance issued by local health authorities. Having a good Business Continuity Plan aided immensely in this regard.
The fact that our local regulator, the Malta Financial Services Authority, was very understanding also with operators who faced difficulties during this time, in providing certain allowances and extensions of a few deadlines, was also very helpful to the industry, and continued to highlight the pro-business approach of the Regulator.
Another major challenge which is to be addressed, in my view, is that Malta has undergone a period of scrutiny particularly in terms of AML processes and procedures, and was thus at times viewed in a less than positive light by operators in other jurisdictions. However, I believe that all the inspections and results have allowed Malta to address and rectify any shortcomings, as a result rendering it a more robust and secure jurisdiction.
What are the most significant developments you expect within Malta’s funds industry over the coming year?
With the introduction of the Digital Finance Package issued very recently by the European Commission, it is expected that there will be significant focus on the needs arising from the evolving digital transformation of finance over the coming years.
Digitisation presents itself as a further challenge facing industry players today. Thanks to the continuous and rapid advancements in technology, we are seeing more and more processes becoming increasingly digitalised within funds and asset management. As with most industries, technology presents both an opportunity, providing a lifeline to asset managers in building lasting relationships with a newer generation of investors, and a threat in increasing competition.
In the funds industry, where competition is rather high, it is therefore important to take the decision on whether to be a leader in times of change or simply a follower. Online retailers and big techs are viewed by some asset managers to be potentially disruptive to their business models. Digitisation is forcing costs down, while improving the user experience and quality and so it is important for industry players to adapt quickly to the changing technologies to maintain market share and keep up with the demands of the newer generation of investors. Of course, service providers must also adapt their offerings to remain able to provide an efficient solution to their asset management clients.
What are the key objectives over the coming year to ensure Malta remains a competitive global jurisdiction?
It is important that, as a jurisdiction, Malta remains nimble enough in offering innovate fund solutions to the industry, as it has always done over the past few decades. Our niche as a domicile continues to be strengthened around the needs of the smaller to mid-size market, and consequently so does the focus of operators present locally.
Added to that, it is also vital for Malta to remain responsive to any updates and adaptations required to continue providing a quality service to operators and to continue to strengthen its position and reputation as an alternative jurisdiction of choice that is flexible, yet within a robust and regulated environment.
Chief Operations Officer, FinanceMalta
Ivan Grech is the Chief Operations Officer of FinanceMalta, the Public-Private Foundation responsible for the promotion of Malta as an International Financial Services Centre. Ivan joined FinanceMalta as Head of Business Development in 2015 after having held various marketing management roles for more than 20 years within the private sector, gaining experience in diverse industry sectors ranging from the automotive business, private healthcare to the FMCG manufacturing sector.