VFM to add 14 new funds
Banking
Valletta Fund Management will be bringing 14 new funds to the market in the next few months. At present it administers 44 funds of which 24 are VFM's own products. With the new funds, well over 50 per cent will be third party funds.
"We have clients from the UK, Italy, Switzerland, the Netherlands, the Czech Republic, South Africa. So we have widened our market not only to continental Europe but beyond," the general manager of Valletta Fund Services, Kenneth Farrugia, said.
"There is a lot of interest in using Malta as a domicile for UCITS schemes, that can be passported to the EU, as well as Professional Investor Funds, which can be used for a variety of strategies, be they equity, bond, property or venture capital."
VFM is now the largest administrator on the island with just under €1 billion under administration. As its work grew, a new subsidiary was formed by the Bank of Valletta Group, Valletta Fund Services, to look after the group's funds as well as the servicing needs of promoters coming to Malta.
The sector is growing: In 2001, the net asset value of funds domiciled in Malta was Lm0.5 billion - it is now Lm8.1 billion. The total almost doubled between 2006 and 2007, and there are now 171 funds domiciled here.
Mr Farrugia has no doubt that the success is in no small part due to the Malta Financial Services Authority (MFSA) and Malta's competitive regulatory and legal framework.
"The framework compares well with those in Luxembourg and Dublin, the main EU financial centres. Apart from that, we are very cost-competitive. If you look at audit costs, for example, the fee would be €5,000-6000, compared to €25,000 in Luxembourg. Likewise for administration fees where you would pay €20,000 a year in Malta, it would be three or four times higher elsewhere.
"Also the regulator is very accessible and pro-business. This is extremely important for a promoter as if you have an investment strategy in mind, you want to get the fund to market as soon as possible as the circumstances in the market change so rapidly," he said.
He warned that financial centres like Luxembourg, Dublin and Guernsey were victims of their own success and were running out of resources.
"It is not yet a problem here. There are some other sectors of the financial services industry that are also growing and mopping up these resources, like e-gaming, which also requires accountants, for example. But the MFSA is being very proactive; it set up an Education Council and introduced accounting technician courses at the Malta College for Arts, Science and Technology, with the number of students doubling this year to 150. The message is getting through, that this is a good career path."
Mr Farrugia said that the sector should always look over its shoulder: Just as Malta is diverting business from established jurisdictions, others may be trying to catch up.
"We are still an emerging jurisdiction and to lose business there would have to be competitive advantages. This will not happen any time soon. We are not likely to reach the cost levels of Luxembourg or Dublin for at least 10 years."
Mr Farrugia, one of the Finance Malta foundation members, said that although the growth in business was accelerating now that it had past the steep learning curve, Malta's name was still not yet known. Although it never had a bad reputation, it had not yet established a good one either.
"I still get people who think we are an offshore location. We cannot wait for people to find out about us, we have to tell them that we are here. This is why Finance Malta is such an important part of the equation. It has a role to play in ensuring that Malta gets the necessary visibility."
A lot of groundwork has already been done. A website has been set up and it has drawn up a guide to doing business in Malta. It finalised an agreement with Country Profiler, which provides economic information on various countries. An annual financial services conference is to be organised in Malta and it is also in the process of recruiting a business development manager.
Finance Malta also set up expert groups on tax, pensions, insurance and investment funds, to harness the expertise scattered across all the operators in Malta.
"The remit of these groups is to look at how the legal and regulatory framework compares with other jurisdictions as there may be a change in the regulatory framework of another jurisdiction which would make us uncompetitive. We must always look over our shoulder at those coming up behind us," he reiterated.
The pension group is looking at jurisdictions that have been successful in attracting pension schemes to ensure that the framework in Malta is competitive.
"Once the government determines the fiscal benefits, we will be ready to go. This will be the next big milestone for fund management as it will entice people to start contributing to a fund. It is a disciplined way of investing," he said.
The general manager of VFM, Peter Perotti believes that the best strategy would be to go for niche funds, rather than major ones with strong roots in older jurisdictions.
VFM is coming up with its own niche products, the most recent being the Wignacourt Commodity Fund, which is based on commodities like coffee and cereals. This is the first of its kind for the company.
"The fund was launched when there was a lot of volatility in the market. The feedback that we were getting from our sales people and other intermediaries was that any new fund would have to be capital guaranteed as people are so apprehensive about the financial markets.
"We then had to decide what to look at. We decided to go for commodities because we believe that there is still a very strong demand for them and not that much on offer at the moment.
"Populations are growing and as the middle class grows, then so will demand for certain products. There is also pressure on some products for non-food use, like sugar, which is used to make ethanol."
VFM got certification last July as a UCITS management company, as well as for the La Valette range of funds. Mr Perotti said VFM could now passport funds to other jurisdictions.
"We are looking at the Italian market for a number of reasons. It is a market that we already understand and Bank of Valletta has a representative office there which helps us to approach companies. They would do the filtering process so that we can target banks and intermediaries who show initial interest," Mr Perotti said.
VFM shareholder Insight Investments is also looking at the Italian market and will no doubt draw on VFM's understanding of the Italian culture.
"We have already made contact with distributors and banks but we need to identify the niche products that would suit the market. It is a long process but at least we have made a start."
"We have clients from the UK, Italy, Switzerland, the Netherlands, the Czech Republic, South Africa. So we have widened our market not only to continental Europe but beyond," the general manager of Valletta Fund Services, Kenneth Farrugia, said.
"There is a lot of interest in using Malta as a domicile for UCITS schemes, that can be passported to the EU, as well as Professional Investor Funds, which can be used for a variety of strategies, be they equity, bond, property or venture capital."
VFM is now the largest administrator on the island with just under €1 billion under administration. As its work grew, a new subsidiary was formed by the Bank of Valletta Group, Valletta Fund Services, to look after the group's funds as well as the servicing needs of promoters coming to Malta.
The sector is growing: In 2001, the net asset value of funds domiciled in Malta was Lm0.5 billion - it is now Lm8.1 billion. The total almost doubled between 2006 and 2007, and there are now 171 funds domiciled here.
Mr Farrugia has no doubt that the success is in no small part due to the Malta Financial Services Authority (MFSA) and Malta's competitive regulatory and legal framework.
"The framework compares well with those in Luxembourg and Dublin, the main EU financial centres. Apart from that, we are very cost-competitive. If you look at audit costs, for example, the fee would be €5,000-6000, compared to €25,000 in Luxembourg. Likewise for administration fees where you would pay €20,000 a year in Malta, it would be three or four times higher elsewhere.
"Also the regulator is very accessible and pro-business. This is extremely important for a promoter as if you have an investment strategy in mind, you want to get the fund to market as soon as possible as the circumstances in the market change so rapidly," he said.
He warned that financial centres like Luxembourg, Dublin and Guernsey were victims of their own success and were running out of resources.
"It is not yet a problem here. There are some other sectors of the financial services industry that are also growing and mopping up these resources, like e-gaming, which also requires accountants, for example. But the MFSA is being very proactive; it set up an Education Council and introduced accounting technician courses at the Malta College for Arts, Science and Technology, with the number of students doubling this year to 150. The message is getting through, that this is a good career path."
Mr Farrugia said that the sector should always look over its shoulder: Just as Malta is diverting business from established jurisdictions, others may be trying to catch up.
"We are still an emerging jurisdiction and to lose business there would have to be competitive advantages. This will not happen any time soon. We are not likely to reach the cost levels of Luxembourg or Dublin for at least 10 years."
Mr Farrugia, one of the Finance Malta foundation members, said that although the growth in business was accelerating now that it had past the steep learning curve, Malta's name was still not yet known. Although it never had a bad reputation, it had not yet established a good one either.
"I still get people who think we are an offshore location. We cannot wait for people to find out about us, we have to tell them that we are here. This is why Finance Malta is such an important part of the equation. It has a role to play in ensuring that Malta gets the necessary visibility."
A lot of groundwork has already been done. A website has been set up and it has drawn up a guide to doing business in Malta. It finalised an agreement with Country Profiler, which provides economic information on various countries. An annual financial services conference is to be organised in Malta and it is also in the process of recruiting a business development manager.
Finance Malta also set up expert groups on tax, pensions, insurance and investment funds, to harness the expertise scattered across all the operators in Malta.
"The remit of these groups is to look at how the legal and regulatory framework compares with other jurisdictions as there may be a change in the regulatory framework of another jurisdiction which would make us uncompetitive. We must always look over our shoulder at those coming up behind us," he reiterated.
The pension group is looking at jurisdictions that have been successful in attracting pension schemes to ensure that the framework in Malta is competitive.
"Once the government determines the fiscal benefits, we will be ready to go. This will be the next big milestone for fund management as it will entice people to start contributing to a fund. It is a disciplined way of investing," he said.
The general manager of VFM, Peter Perotti believes that the best strategy would be to go for niche funds, rather than major ones with strong roots in older jurisdictions.
VFM is coming up with its own niche products, the most recent being the Wignacourt Commodity Fund, which is based on commodities like coffee and cereals. This is the first of its kind for the company.
"The fund was launched when there was a lot of volatility in the market. The feedback that we were getting from our sales people and other intermediaries was that any new fund would have to be capital guaranteed as people are so apprehensive about the financial markets.
"We then had to decide what to look at. We decided to go for commodities because we believe that there is still a very strong demand for them and not that much on offer at the moment.
"Populations are growing and as the middle class grows, then so will demand for certain products. There is also pressure on some products for non-food use, like sugar, which is used to make ethanol."
VFM got certification last July as a UCITS management company, as well as for the La Valette range of funds. Mr Perotti said VFM could now passport funds to other jurisdictions.
"We are looking at the Italian market for a number of reasons. It is a market that we already understand and Bank of Valletta has a representative office there which helps us to approach companies. They would do the filtering process so that we can target banks and intermediaries who show initial interest," Mr Perotti said.
VFM shareholder Insight Investments is also looking at the Italian market and will no doubt draw on VFM's understanding of the Italian culture.
"We have already made contact with distributors and banks but we need to identify the niche products that would suit the market. It is a long process but at least we have made a start."