Malta’s Sovereign Wealth Fund Investing in the Economy of Tomorrow

Malta, the European Union’s smallest member state by population, but the bloc’s fastest growing economy, today competes with other EU jurisdictions within the Mediterranean region – Cyprus, Greece, Spain and Portugal – to attract so-called “citizenship by investment”.

Boasting one of the EU’s most attractive fiscal frameworks, the country’s general economic strategy can be summarised as achieving growth through investment. And Malta has been remarkably successful in accomplishing this objective over the past few years, due in no small part to its open and inclusive investment climate, coupled by an Individual Investor Programme (IIP).

Although legally recognised by the European Commission and the EU’s executive body, the implementation of the IIP by Malta – and various other Southern EU countries – has drawn criticism from some fellow EU members and institutions. But this criticism is strongly rebuked by the Maltese government, which highlights the use of similar programmes in the past by larger states (including the United Kingdom) to develop their own economies.

Malta has also vehemently defended the rigorousness of its IIP criteria. Along with a list of eligibility requirements including residence in Malta, successful candidates and their families – who, if successful, are granted Maltese and EU citizenships – must invest an estimated 900 thousand euros, of which 650 thousand euros is a minimum for contributing to the National Development and Social Fund (NDSF).

Spurring Growth and Development

The NDSF, which was established in 2015 and acts as Malta’s Sovereign Wealth Fund, is mandated with administering these funds. Beyond its investment activities, the NDSF finances projects in the country linked to public health, education, job creation, social improvement, and innovation – making the IIP a very potent and meaningful source of foreign investment into the country.

As the CEO of the Fund, Raymond Ellul, explains: “The raison d’être of the NDSF is really to administer the funds which emanate from the Citizenship by Investment Program. It was set up by law, and our funding regulations state that 70 percent of those proceeds have to be administered by a specially set up government agency.”

Though autonomous, the NDSF – which currently manages a portfolio totalling close to half a billion euros – works closely with the government and has two main objectives. While the first objective is linked to economic development, the second – specifies the CEO – “is towards the social wellbeing of the nation”.

“So in actual fact, this is a differentiating factor from other sovereign wealth funds. [Though] we are a sovereign wealth fund, the main investment objective – the overriding objective – is to preserve capital and seek a positive total return in the long term.”

Conversely, the majority of sovereign wealth funds around the world act as stabilisation funds, because their main export is a commodity – most commonly, oil or gas – that is highly susceptible to fluctuations in international prices. As a country that lacks natural resources, Malta’s fund capitalises on revenues derived from the IIP.

Of the NDSF’s two main portfolios, one is a discretionary portfolio which is managed by the Central Bank of Malta, through which 30 percent of investable funds are channelled. The remaining 70 percent is invested in a directed portfolio, which contains strategic economic and social investments for the long-term development of the island.  On this front, the Fund’s autonomy from the government is significant.


Published: 29 July 2019

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