Complexity often means risk, mess and can easily spell disaster. The fund sector for example, is one that requires constant thinking, innovating and success management; and it’s not always so easy, especially with a myriad of tasks and operations to see to internally. Below Lauri Paal, who used to work with Skype, Microsoft, and is now the Chief Product Officer at KNEIP, discusses with Finance Monthly some things the funds industry could learn from the telecommunications industry, from consumer behaviour to outsourcing and standardization.

Telecommunications has changed significantly in the last ten years. The regulation, technology and approach have all been reviewed and the industry has seen obvious moves. For example, voice to data as well as communications switching to apps. Moving into financial services, I have witnessed complex regulation and, like in the telecommunications sector, this is constantly changing and creating new challenges. However, our approach and business practices have not changed.

From the outside it is easy to think that the reason the telecommunications industry changed is because of the rise of 3G and eventually 4G technology. But the truth is that change is driven by consumer behaviour and I like to believe Skype played a part in how people consume technology today. Skype’s approach to voice services radically changed the market as we focused on lower cost and high quality international calls. To guarantee this standard, in traditional telecoms networks, operators needs to connect to hundreds of networks globally. Quantitative measures are used to monitor performance. At Skype we defined quality of service as a core value. We created a live feedback feature which is used after every call and we built an algorithm which allowed business allocation based on customer feedback. We drove this innovation.

Non-core activities were outsourced to specialist organisations. We did not build local infrastructure as many telecommunications agencies have in the past, we outsourced to partner management operations, including pricing and invoice management. The results were positive for everyone with each industries’ players focusing on their specialist industry, ultimately providing the customer with a better experience.

Now, in the financial services industry, I think there are a number of lessons that we can take from the disruptive approach in telecommunications and change the way our sector operates. Too much of our industry is still reliant on manual operations and systems are not streamlined to free up professionals to work on their area of specialism rather than on back office functions. Just as voice has become a secondary asset to data in telecommunications, so to traditional investment - especially assets under active management - is facing an optimisation drive. We need to find solutions that automate compliance processes, giving better focus to core activities.

I think the industry needs to push for standardised back office functions and compliance process. We have spent months preparing for PRIIPS and MIFID II but this needs to pay off for the end user. These complex regulations have focused on transparency but that is only beneficial if it uncovers inefficient historical processes, and force companies to adapt and innovate, ultimately becoming more effective. The industry, jointly with the regulators, should focus on understanding and enabling technology trends. Markets tend to be self-regulating, driven by customer demand. Perhaps keeping the end customer (or investor) in the centre of the process and making sure initial objectives were met post implementation will ensure processes are improved.

Asset managers currently tend to build a lot of solutions internally. The industry should rather take a step back to determine which tasks are core, such as product manufacture and investment management, and which tasks can be considered as non-core. Doing so could lead to greater business efficiencies and could, given time, lead to a more standardized industry, as we all witnessed in the communications industry.

However, I think the biggest lesson we can learn from the communications industry is the need to put customers in control. We are seeing trends towards younger investors demanding more knowledge of and access to their investment choices. We need to look at systems that allow the end user to understand and put them in control, whether they are an asset manager or an individual. If we can simplify processes, then their needs will define the future of the industry. Customers will decide and putting them in control needs to be our mission regardless of the industry.

“Strong global market sentiment for risky assets, a weakened dollar and geopolitical turmoil in the Middle East underline the need for a long-term multi-asset portfolio”, asserts a leading global analyst at one of the world’s largest international advisory organisations.

deVere Group’s International Investment Strategist Tom Elliot, is weighing in after the IMF upgraded its estimate of global GDP growth this year to 3.9%.

Mr Elliot comments: “We have seen an unusually strong start to the year for risk assets, as global investors appear confident that a period of non-inflationary, globally synchronised economic growth is underway.

“Equities and non-core bond markets have benefited from strong inflows in recent weeks, with a slow creep upwards in core government bond yields doing little to deter enthusiasm for risk.

“The MSCI World index of developed market shares is up 7.0% since the start of January, and up 5.5% in local currency terms. The Japanese economy grew at an annual rate of 1.4% in the third quarter 2017, despite a shrinking population. And the MSCI Emerging Market index is up 9.9% since January.

Mr Elliot details three major theories that are on offer for these developments: “Firstly, the ECB and the Bank of Japan look likely to end their quantitative easing programs earlier than had been anticipated, so bringing forward the date when those central banks might also start to raise interest rates.

“Secondly, Trump’s tax cuts announced in December are worth an estimated $1.5tr over the next five years, at a time when the labour market is already tight. This raises fears of wage inflation pushing up CPI inflation.

“And thirdly, a suspicion by many FX traders that the Trump administration wants a weaker dollar as a deliberate tool for narrowing the trade deficit, to be used alongside more overtly protectionist policies. Trump denied this while in Davos on Thursday, calling for a strong dollar… ‘ultimately’.”

Mr Elliot underlines how Sterling’s strength has contributed to a return on the MSCI U.K. index of -0.2%, as dollar-earning FTSE100 heavyweights have come under pressure, and to a return on the MSCI World index in sterling terms of just 2.0%.

He goes on to say that Trump’s ‘Make America Great Again’ policy poses only a modest attack on free trade, and that it should be contextualised.

Mr Elliot states: “Bush raised tariffs on European steel imports early in his first term, and massively expanded agricultural subsidies. The sky did not fall down. We must hope that Trump’s attacks on free trade remain relatively specific and do not become broad in scope.” At the same time, Central bank policy errors remain “a key risk to capital markets”, asserts Elliot.

He says: “Anything that produces a sudden rise in core government bond yields, or cash rates, are a threat to stock markets and high yield bonds.”

“Meanwhile, geopolitical turmoil in the Middle East should be observed closely”, says deVere’s top analyst.

Mr Elliot comments: “The Middle East is developing new themes that one needs to keep an eye on, partly because of the ongoing risk of a regional clash, but also due to the young populations who are less conservative and less inclined to tolerate the status quo.”

He concludes: “As such, I strongly advise a multi-asset portfolio for the long term to offset financial volatility, centred around 60% global equities and 40% global bonds.

“Such funds predicated on this principle are available in spades and differ according to the level of risk for suitable investors, who more often than not, value certain returns over high-risk gambles.”

(Source: deVere Group)

Douglas G. Fathers is the Founder and Managing Director of SCG Fund Services (an Equityhub Group company) and is responsible for the overall day-to-day operations and management of the business. As an accomplished entrepreneur and business leader with a diverse background with over 32 years managing global companies in various industries, his unique perspective has been the stimulus towards his current success. SCG Fund Services launched in 2005 and for past 13 years have specialised in offshore fund formation. Today, SCG is considered one of the foremost consulting firms in the offshore fund industry with a presence in The Bahamas, BVI, and the Cayman Islands. As part of this month’s Professional Excellence feature, we spoke to Douglas about fund management in The Bahamas.

What type of funds does SCG Fund Services assist with? Are there fund structures unique to The Bahamas?

SCG Fund Services specialise in providing global clients with professional guidance through all aspects of launching and operating a fund. Our services extend to all stages of the fund formation process — from entity formation and the preparation of full-colour offering documents to advising clients on the selection of service providers to marketing the fund.

SCG maintains a personalized approach to guiding and educating new and emerging fund mangers in structuring both domestic and offshore funds. Our consultants and attorneys have significant fund experience in both the US and offshore.

In today’s challenging environment, The Bahamas offers several attractive structures used by professional managers, family offices, and project finance professionals. Within The Bahamas modern-day Investment Fund Act, there are four classes of funds including the Standard fund, Professional fund (open-end & closed-end), SMART fund, Recognised Foreign Fund. The SMART fund is unique to The Bahamas and provides managers several options to fit their needs.

Are certain funds more applicable to particular individuals and their circumstances?

Yes, certain fund structures are more applicable to the needs and circumstances of individual or group establishing the fund. For instance, an investment manager launching a fund with a specific strategy is likely to use a professional fund; whereas a private investment group or family office may prefer a Bahamas SMART fund. Strategies with illiquid investments, such as private equity or real estate investment, would favour a closed-end fund structure.

How important is the support function following a licensing?

Most jurisdictions, including The Bahamas, require licensed funds to engage an auditor and an independent fund administrator. These service providers provide investors with transparency and general oversight of the funds management and activities. The fund administrator provides most of the back-office tasks for the manager giving him/her more time to focus on the investments of the fund.

What factors would determine which jurisdiction to setup and license the fund?

There are several factors to consider including the reputation of the jurisdiction itself & its securities commission, the investors perception, foreign government’s perception, cost of setup, on-going fees, ease of setting up a bank account, licensing requirements, and regulatory requirements after licencing to name a few.

What structure should a manager use when setting up an offshore fund?

There are a number of structures to consider and in most cases, it would be determined depending on the location of the manager, location of the investors, and the type of investments the fund will make. Typically, you have four structures that include the Standalone, Master-Feeder, Side-by-Side, and Segregated Portfolio Company.

Standalone structure is one where only one fund vehicle (entity) is used. A Master-Feeder structure is typically used when there is a US presence and where a single manager is seeking investment from both US and non-US or tax-exempt US investors. The structure will comprise a master fund (an offshore vehicle), which conducts the trading, and at least two feeder funds that invest all of their assets into the master fund. A Side-by-Side, similar to a master-feeder structure, is used where a single manager is seeking investment from both US investors and non-US or US tax exempt investors. There will be two funds, an offshore and domestic US fund, both identically managed. Lastly the Segregated Portfolio Company or “SPC”, also referred to as an Umbrella fund, is a company where separate portfolios have statutory segregation of assets and liabilities. These are popular for operating various classes or portfolios with separate strategies.

Address:
Ste 205A-Saffrey Square
Bank Lane & Bay Street
P.O. Box N-9934
Nassau, NP Bahamas
Phone: +1 212 920 6690
Email: sales@scglimited.com
Website: https://scgfundservices.com/

Finance Monthly speaks to lawyer Rona Kaspi about trends within Maritime Law.

What’s your general opinion on the current position of vessel financing environment realized since 2008?

The maritime sector is one of the sectors affected by the global crisis after 2008. The global crisis started a chain reaction causing a constriction in trade, resulting in a negative impact on both the shipping and banking sectors, which, in turn, had adverse effects on the rapid financing of the maritime sector. The maritime sector, which takes up little space on their balance sheets, has become a sector that larger banks, and, in particular European banks, want to exclude from their portfolios due to the losses it causes them. Other than a few banks that have the expertise and are efficient in the maritime field, several German banks that do not consider maritime clients as their target audience made the decision to withdraw entirely from the maritime sector, especially in Turkey. They have chosen to transfer the credits to third parties by giving 30-40% discounts on the debt amount of the principal, for the sole purpose of removing it from their balance sheets. While executing such transfers, the loan repayment performance of the indebted companies have not been considered. They removed the companies that do not have other source of income and are not managed in a professional manner and have limited the number of vessels in their portfolio.

After the unfavorable market in 2016, improvement in the sector is being projected by ship owners and shipyards in 2017 onwards. What is your opinion on this? Where do you think the financial opportunities will come from?

2015 was quite fruitful for tanker owners but, as mentioned, 2016 was not a productive year. Currently, the conditions for dry cargo and tanker markets look positive and I can confidently say that Turkey has a very influential position in the region in relation to shipyards.

It is impossible to find availability repair and docking services at the shipyards. This is an indicator of the success of the services provided by the shipyards in the region.

However, the maritime sector is no longer a primary sector whose investment is supported by European Banks, neither in relation to ship owners nor to shipyards. The rapid fluctuations caused a disincentive to banks which would be interested in earning money in a short period of time through high interest rates expected for a limited number of banks. The European Banks consider the labor force used in relation to maritime loans under €20 million as unproductive. Additionally, banks prefer giving loans to holding companies that have a more professional administration structure to family companies. Due to this, it would not be easy for Turkish ship owners and shipyards to find foreign financing. On the other hand, local banks continue to actively provide a support to the maritime sector. However, during client selection, the local banks consider not only the financing of the vessel, but also the previous loan transactions of their clients and their relationship with the banks during the previous crisis period.

Today, firms which continued their activities find themselves to be grateful to the local banks that supported them during the financial crisis. This has changed the sectorial companies’ opinion on the banks. Although local banks offer higher interest rates when compared to foreign banks, they now have more customers in the sector due to the support they’ve offered to their clients. Local banks will continue to provide their financial support, however, access to foreign financing sources will gradually become difficult.

What is the risk perception in respect of maritime assets and, among others, are there any less-risky vessel types? How eager are the banks to take maritime investment risks?

While the foreign finance institutions make sector assessments for long terms, local finance institutions offer lending for smaller amounts and shorter terms. Foreign finance institutions prefer providing funds to the publicly-traded firms or maritime companies, rather than financing an individual vessel.

Before the 2008 crisis, when the market was at its best, financing of general cargo vessels was as common as financing larger ships. Perhaps this has deteriorated more rapidly after the crisis, in comparison with other vessel types. Is it likely that the banks specialised in global vessel financing may again show such an interest in the short and medium term? How accessible would financing be for small vessels and ship owners?

As far as local banks are concerned, coaster-style small vessels will always continue to be attractive to them, however, they are out of the scope for foreign banks. In my opinion, local banks will continue to finance coasters by taking additional guarantees, such as maritime hypothecation.

In this context, how risky are the short-distance sea transports and general cargo vessels, according to banks?

Local banks will always deal with local trade. Nevertheless, there will always be requests for additional guarantees. Most of the local banks do not consider the clients they finance as business partners and they do not consider vessel loan transactions as project financing – to them, this is asset financing. Hence, this always necessitates additional guarantee requests that are not ship mortgages.

Have European banks overcome the crisis or are there any new mergers and consolidations in the future?

As far as European Banks are concerned, the issue is not restricted only to a maritime crisis. Actually, one of the reasons behind the crisis in the maritime sector is the global banking crisis. Many banks leave the maritime sector, make major discounts on their credits, sell the credit or pressuring their clients to settle the loan, as they’re not familiar with maritime market and they don’t have control over the market. Although the risks are generally small, maritime creates significant issues in the balance sheets of foreign banks. Overall, banks are doing well and I don’t think that they will be faced with any unfortunate surprises in the near future.

The vessel prices reached rock bottom, which presents a great opportunity for the ship owners who would like to enlarge their fleets. On the other hand, financing opportunities are very scarce too. So much that, even if there are financial means, it is not possible for some vessels to generate enough daily revenue to make the repayments in the current markets. In this regard, would it be less risky for the banks if they finance the vessel purchases at the current lower prices with more convenient payment conditions and then increase the repayments when the vessel prices increase?

The developments in our maritime sector gained momentum after 1995, but real growth was achieved in the beginning of 2000s, due to the involvement of foreign banks.

During those years, banks and finance institutions played a great role both in the second-hand market and in supporting the construction of new ships. However, when we’re in foreign countries, we see companies making continuous investments to the maritime sector. It is not possible to reach a strong capital structure within a short period of time. Although rapid growth seems attractive to people, the status of the companies that do not have the adequate capital structure to overcome the crisis will always be a danger. In the maritime field, the most impossible situation can be encountered. It is vital to ensure that your company has a strong capital at all times to take the necessary measures and be able to position itself in the event of a crisis. Instead of targeting a rapid growth for their companies in the short run, the partners of the company should target a company structure, which is managed professionally, maintains the speed of growth within the frame of a specific plan and ensures survival by relying on its strong capital structure in case of a risk. A consistent growth should be targeted; our recent experiences showed us that a rapid rise might lead to a sharp decline.

Finally, we are all aware that standards such as Basel 3, which require greater transparency, have been introduced. In this respect, what are your suggestions to the Turkish ship owners about the transparency requirements that need to be satisfied by banks in the future?

First of all, they must ensure a more professional administrative structure. Many banks have actually witnessed the problems which occurred in family companies. Having witnessed issues resulting from family-related problems, banks which previously had a large number of clients in Turkey have now stopped to gravitate towards the country. Family members can be the partners of the company but their personal issues should not affect the daily business of the company. Besides, transparency in the capital structure is also required. Evidence about the source of the capital should be made available. Now there is no off-the books money. The companies should be professionally managed, their accounts should be audited and the audit reports should be submitted to the banks regularly. Today, the application forms of the banks that needs to be filled by standard clients require the name of the audit firms and lawyers. Refraining from auditing may result in saving a small amount, but it is important to mention that the companies that submit regular audit reports have better reputation in the eyes of banks.

Website: http://www.aktlaw.com

Joseph Camilleri, Executive Head Business Development & Corporate Services at BOV Fund Services, talks to Finance Monthly about Malta’s fund industry, Brexit and the hurdles that the fund services sector is faced with in a scenario of on-going regulatory developments.

Within the context of a highly regulated fund industry, how is Malta coping in ensuring that it keeps pace with bigger fund domiciles?

I trust we’d all agree that the fund industry is increasingly becoming overcrowded with regulation, well intended as that may be. We’d also agree that such poses challenges to all stakeholders, be they investors, investment managers, service providers and fund domiciles too of course. Malta is in no way an exception to this.

The challenges may seem somewhat bigger and more difficult to address if the domicile is a relatively new and upcoming one; particularly if the domicile has built its fund and fund management industry on the small and medium sized funds and fund managers, as is the case for Malta, which by the very nature of their size, are impacted to a larger extent by the over-regulation in the industry.

Notwithstanding the above statements hold true, Malta has in my view, weathered the storm in a convincing manner. The key word here is “adopting” rather than adapting to new regulation, and ensuring that its pre-emptive stance pays dividends. The island’s positioning as a fund domicile has seen it consolidating its strengths in particular niche areas which it has continued to develop over the past few years. All of this further underpinned by the pro-active mindset of stakeholders (service providers in particular) in ensuring compliance to new regulations through the timely provision of additional services to the industry, in a cost competitive backdrop.

Malta’s fund industry has established itself as a domicile of choice to many start-up hedge fund managers. Its highly competitive package, the pro-business approach and accessibility of Malta’s single regulator, the robust yet flexible regulatory framework for deminimis (out-of-scope) funds in terms of the AIFMD, the efficient process for licensing, as well as the presence of several service providers on the island, within the context of a cosmopolitan lifestyle have and are attracting several investment managers to our shores.

Within the AIFMD realm, Malta too has identified its own niche segments: the past couple of years have been characterised by full scope AIFMs, whether based in Malta or other EU member states, structuring fully compliant AIFs having diverse strategies. Most notable, we have seen a growing number of AIFs being set up investing in real estate and other real assets, we have seen Private Equity funds being set-up, as well as the emergence of loan funds. Thus funds that require depo-lite services, as opposed to fully fledged depositary services, have been very conspicuous in Malta’s development of its fund industry.

The recently introduced Notified Alternative Investment Fund (NAIF) has thereagain been an innovative and positive contributor to the growth of the industry in the AIFMD space. Full scope AIFMs across the EU now can have their fund structures, SICAVs, Contractual Funds, Limited Partnerships, or Unit Trust Funds up and running within 10 working days of notifying the regulator. A far cry from passing…

How do you see the Brexit realities impacting Malta’s fund and fund management industry?

Difficult to tell given that the Brexit realities are still an unknown. The shape of things to come post conclusion of negotiations between the parties is still to be seen. Having said that, we’re already seeing major cities within the EU taking rather aggressive approaches in an attempt to position themselves in time (particularly should all go the hard Brexit way) to attract London-based businesses their way.

To a degree, I tend to think that attempts at unseating London as Europe’s main financial services centre is rather delusional. There’s likely to be a repositioning of course, yet London is London and will remain a major player, not necessarily very different to what it is today.

The way Malta is looking at Brexit is quite different; rather than adopting a vulture approach, as seems to be the case for the other EU contenders for the top spot in financial services, Malta’s approach is a softer one - one that augurs for a strengthening of the legacy relationship between the UK and its former colony Malta.

Malta is in fact in an ideal position to act as a bridgehead for UK-based businesses (and not limitedly to financial services businesses at that) to access the wider EU market.

There are various reasons why Malta sees it differently; apart from the legacy relationship mentioned earlier, there are other realities that are worth mentioning that render the relationship one based on mutual respect and understanding:

- English being an official language of Malta.
-The island’s membership and active participation in the Commonwealth.
-The British business ethics deeply rooted in Malta’s own conduct of business.
-The similarities in the socio-political make-up of the two countries.

It is thus of no surprise that we are seeing London-based operators teaming up with ManCo and Super ManCo platforms in Malta to explore alternative solutions for different Brexit scenarios that would allow them access to the EU market. Others are setting up their own “lean” fund management operations in Malta, as UCITS managers or AIFMs, to carry out the risk management function for their fund vehicles, whereas the day-to-day portfolio management activities are outsourced back to base, in London.

Malta’s way of looking at the opportunities coming out of Brexit are of the win-win sort; and it is precisely this that is elevating Malta’s stature in the eyes of UK-based operators.

What are the major challenges for a company like BOV Fund Services in a scenario of on-going regulatory developments?

There are various facets to regulation: some see regulation as a safeguard to investors, others to the system itself, some see it as an overkill and an unnecessary money drain.

Whichever line one might take, it is indisputable that regulation presents both challenges and opportunities for service providers, particularly fund administration companies. BOV Fund Services is in this space, and it too is not immune to such.

Regulation has predominantly meant additional and extensive reporting. In view that most fund data is held by fund administrators, it follows that the latter are in such scenarios are best placed to provide additional services to funds and their fund managers, thereby enabling these to comply with the newly introduced obligations.

This has been true for AIFM Annex IV reporting, FATCA, CRS and others. So has regulation impacted all fund administrators in the same manner? The short answer to this question is no. There have been winners and losers in the game; the winners where those service providers that ensured a level of preparedness in good time. The ones losing out on the other hand have been the laggards, those that considered the aforementioned regulations as the Managers’ and the funds’ problems. In effect, such regulations place obligations, sometimes onerous ones, of the funds and their managers.

Yet, fund administrators that evaluated the regulations as their draft versions were published, that understood the implications, and that geared themselves up to provide timely solutions in a cost competitive environment, not only ensured that their clients were compliant as from d-day, but they also consolidated the loyalty from their client base as well as created new revenue streams for themselves.

BOV Fund Services is in this second category. It has invariably sought to be ahead of the curve in terms of assessing the likely requirements of its client base emanating from new regulation. It invested heavily in its IT infrastructure and entered into agreements with system providers to automate reporting.

This has ensured that the company consolidate further its market leadership in Malta as the island’s number 1 fund administration firm (in terms of Assets Under Administration as well as number of Malta-based funds administered by the company), within a context of crowded market of 27 fund administration firms operating from Malta.

What has the AIFMD meant to your clients in the alternative space?

Essentially there are three categories of clients that we service, and for whom the AIFMD and its implications came to the fore.

When the initial draft of the AIFMD was published, it was quite evident as of those early days, that the directive had two core outstanding features:

- Albeit purporting to be intended to address systemic risk, it was largely perceived as being an EU protectionist measure, and
- It was bound to negatively impact small-sized alternative fund managers and fund domiciles that catered for this segment of the market.

Malta’s financial regulator, the MFSA, thanks too to the listening ear, lends to the local operators in Malta, wisely decided to defend its territory. As mentioned earlier, Malta had by then attracted a relatively large community of international small and medium sized fund managers to structure their fund vehicles in Malta. It was thus imperative that the goose that laid the golden eggs be safeguarded from the overarching burden that the new regulation was set to bring to the table.

In effect, rather than replacing the old with the new, MFSA introduced a new fund regime, the Alternative Investment Fund rule book, as distinct from the already existing Professional Investor Fund rule book. This latter regulatory platform for alternative funds, with its inbuilt flexibility within a robust framework, had enabled hundreds of fund managers (several of whom small-sized) structure their alternative strategies, ranging from hedge funds, to private equity, real estate, fund of funds, distressed debt, high frequency trading funds to a myriad of others.

It was inconceivable that this segment should be burdened by the heavy regulatory baggage that the AIFMD promised to introduce. In view that the directive’s provisions become mandatory for alternative managers having in excess of Euro 100 million in AUM (leveraged funds), it followed that those below the threshold should be given the opportunity to retain the status quo in terms of the regulation they were subjected to.

Now that the directive has been up and running for a number of years, it is clearly evident that retaining the PIF regime was a wise decision: alternative funds subject to this rule book continue to grow year-on-year.

Back to the three categories:
- The deminimis fund managers and the below threshold self-managed funds were given an option to sign up for the regulation, be subject to all its provisions, and on the upside, benefit from the EU passport. In most cases, they opted to stay put!
- A second category was made up of those that actually “went for it”, driven by one or two factors: the growth potential arising from the passport, and/or the fact that their AUM was just short of the threshold, so it was a question of time for them to adhere to the regulation.
- The third category consisted of those that were captured by the directive due to their respective AUMs (which were already in excess of the threshold). This segment had no other option but to comply, and make the most of it through the passporting rights.

In conclusion, I’d say that Malta’s regulations for the alternative strategies is such that enables acorns to grow into oak trees, without imposing upon them at the early stages of their lives, the rigours of over regulation that the AIFMD seems to be riddled with.

Website: https://www.bovfundservices.com

To learn more about the Fiduciary services in Malta, this month Finance Monthly reached out to Samantha Snow, Client Services Director at Abacus Corporate Services - a leading fiduciary, funds and professional administration service specialist.

Could you tell us a bit more about Abacus and the services that the company offers? What are Abacus’ priorities towards its clients?

Abacus is a leading fiduciary and fund services group, based in Malta and in the Isle of Man. We have an established track record of more than 40 years of excellence in providing fiduciary and professional administration services to an international client base. We pride ourselves on our stable history and our commitment to delivering value combined with top quality in bespoke solutions that are tailored to meet each client’s needs.

Our services include the establishment and administration of tax efficient corporate structures or fund, yachts and aircraft registration and management, statutory and administration services, provision of officers, corporate services and compliance support, tax consultancy and tax planning, VAT registration and administration, bookkeeping and accounting services, and cash management facilities.

Fiduciary services are broad ranging; typically what matters do Abacus assist clients with?

In a fast evolving world it is important for us to be proactive. We are committed to finding new ways in which we can assist clients through the development and provision of new solutions and keeping pace with change and ever more sophisticated tax planning. Whether an investment portfolio, trading company, real property, a luxury yacht or business jet, we can establish an effective trust, foundation, company or fund structure tailored to the needs of our clients and offer associated administration services and back office support at a level they require.

Can Abacus ensure high levels of regulatory compliance and appropriate degree of protection to clients?

Abacus Financial Services (Malta) Limited is recognised by the Malta Financial Services Authority as a fund administrator and Abacus Corporate Services Limited is authorised by the Malta Financial Services Authority to provide trustee and other fiduciary services. The Authority regulates and supervises credit and financial institutions, investment, trust and insurance business, whilst encouraging high standards of compliance.

Abacus Trust Company Limited and Abacus Financial Services Limited are licensed by the Isle of Man Financial Services Authority, which is the regulatory body for the financial sector in the Island. The objectives of the Authority are to secure an appropriate degree of protection for the customers of financial services providers, the reduction of financial crime and the maintenance of confidence in the Island’s financial sector through effective regulation.

 You offer VAT expertise across both Abacus’ offices – what are the most common matters that you assist with? What does your role as a Client Services Director involve?

I am responsible for leading the Malta team in the development of client relationships and enhancing technical skills with particular focus on the VAT/tax side. Typically, I help clients with providing a range of support services to ensure that their structures and/or assets are effective and run efficiently. Furthermore, I assist them in mitigating their liability to tax during their lifetime and in implementing solutions for wealth preservation and funding long term care.

What attracted you to specialise in VAT and Indirect Tax matters?

I initially began my career as a VAT Assurance Officer with HM Revenue & Customs in the UK -carrying out VAT inspections, then I moved on to work within the accounting and corporate sector. I spent over 15 years specialising in VAT and Indirect Tax matters and working with both domestic and international clients across a diverse range of sectors including the Remote Gaming, Financial Services, Yachting and Property and Construction industries.

What is your outlook on the future of Abacus? 

Both Abacus and its service offerings have established a solid base and experience over the last 40 years, whilst maintaining the founding principles of applying integrity, independence and insight across our clients’ requirements, values which have gained us recognition as a leader in our field. As one of the longest established and reputable service providers on the Isle of Man, we later expanded into Europe through the establishment of a Malta office, as stable, yet progressive jurisdiction. Additionally, Malta also enjoys a positive rating and one of the strongest macroeconomic expansions in the Eurozone.

So, if life truly does begin at 40, and the past 40 years are anything to go by, perhaps the fun really does start at 50… which means Abacus has a lot to look forward to over the next 10 years… and thereafter!

Contact details:

Samantha Snow

Client Services Director

Abacus Corporate Services Limited (Malta)

samantha.snow@abacusmalta.com

+356 20650 500

Private investors are seeing this morning’s market falls as a buying opportunity. 80% of the trades placed through Hargreaves Lansdown’s share dealing service this morning were purchases. This compares to around 60% on an average day.

Senior Analyst at Hargreaves Lansdown, Laith Khalaf commented: ‘Private investors are clearly seeing today’s market fall as a buying opportunity, and are out in force bargain-hunting. The most popular stocks are also those which have seen their prices hit hardest this morning, namely the banks and house builders.

We know that private investors have been sitting on the sidelines until after the referendum, and early indications are there may be some buying activity now the market has dropped.’

The UK stock market fell sharply this morning, but has since staged a bit of a recovery, though it is still down around 4.5%. The FTSE 100 has been bailed out by a falling pound, but the FTSE 250 mid cap index has not been so lucky- it has fallen by over 8% by lunchtime, because it is more domestically focussed and has fewer overseas earnings. Just to give some context to the fall, the FTSE 100 is still currently trading at above 6,000, around 10% higher than the low of 5,537 it fell to in February of this year.

The FTSE 100 has fallen further in the past. On Black Monday, in 1987, it fell by 11%. On 10^th October 2008, it fell by 9%. On 11th September 2001, it fell by 6%.Nonetheless, today’s fall so far makes it one of the worst days the Footsie has witnessed.

Laith Khalaf says: ‘The Footsie has been bailed out by the Sterling collapse, because all its international revenues streams are now worth that much more in pounds and pence.

Financials and house builders are bearing the brunt of the pain, with Lloyds bank being one of the biggest fallers. It’s probably safe to say the public sale of the bank is now firmly in the long grass, and the return to full private ownership of both Lloyds and RBS has been knocked off course.

It’s also been a bad day to be a mid-cap company - the FTSE 250 is suffering to a much greater extent than the blue chip index. Mid-cap companies have sold off harder because they are perceived to be more risky, and tend to be more domestically-focused with fewer overseas earnings.’The 10 most popular shares bought by private investors this morning, ordered by the number of trades placed are:

Below are the top ten funds purchased, ordered alphabetically. Tracker funds have proved very popular today as investors have simply sought blanket market exposure. However the tried and trusted names of the industry are proving popular too.

(Source: Hargreaves Lansdown)

Laith Khalaf, Senior Analyst, Hargreaves Lansdown

The average UK fund has returned 90% since December 1999, this compares with a return of 68% from the FTSE 100, with dividends re-invested, according to UK investment management firm Hargreaves Lansdown.

With UK managers increasingly investing outside the big blue chips of the FTSE 100, Hargreaves Lansdown says it is more appropriate to compare them to the FTSE All Share, which includes medium and smaller companies.

Over this period the FTSE All Share has also returned 90%, so the average active manager has performed exactly in line with the market, on average.

“While the FTSE 100 has only just recovered its 1999 high, some funds have made serious amounts of money for investors. This tells us some active managers do significantly outperform the index, even if many don’t. If investors can spend a little time picking out the winners, they stand a good chance of making themselves much wealthier,” said Laith Khalaf, Senior Analyst, Hargreaves Lansdown.

Marlborough Special Situations was the best performing fund over this period. It has been run continuously by Giles Hargreave. A £10,000 investment on December 30. 1999 would today be worth £71,770.

Schroder Recovery was the best performing UK fund over this period, excluding funds in the UK smaller companies sector. A £10,000 investment on December 30, 1999, would today be worth £50,877.

The performance of these funds illustrates the long-term rewards on offer to investors who pick good quality active funds. By comparison a typical UK index tracker fund would have turned £10,000 invested in 1999 into £17,900 now.

The best sectors for investment since 1999 have generally been in the emerging markets. Among the UK sectors index-linked gilts led the way. UK Smaller Companies were the best performing UK equity sector, followed by UK Equity Income, with the UK All Companies sector bringing up the rear.