#Launching an incubator hedge fund trial

Managers and promoters of start-up hedge funds will usually think of the warm tropical climates of Caribbean islands when thoughts turn to their preferred domicile for funds. An incubator fund can be created by breaking down the hedge fund development process into two stages. However, financial regulations and practicalities are now convincing more and more early-stage managers to consider Malta as their domicile of choice, and not just because of the Mediterranean island climate with excellent tourism opportunities and 300 days of sunshine per year. An excellent way to do this is through a so called incubator fund, which is an alternative for hedge fund startups who do not yet have the track record necessary to attract investors. Incubator funds provide investment managers and traders with a cost-effective stepping stone toward launching a full-fledged hedge fund. Whilst it was the bloodthirsty pirates that first ventured from Europe into the Caribbean islands, invasions are nothing new to the Maltese either. Phoenician sailors, Roman centurions, Arab traders, pirates and Norman mercenaries were also drawn to the island’s natural harbours and strategic location between Europe and North Africa. The later British ‘stay in residence’ eventually proved beneficial to Malta’s rise as a financial hub, via the legacy of the English language, with English commercial law having been grafted onto the island’s civil law system, alongside the “Anglo-Saxon” work ethic, as some like to describe it. Malta is already earning independent plaudits from within the hedge funds industry for its quality as a launch pad for fund vehicles. This is not just because of the fact that the climate is far superior to that of its main rivals in that category, Dublin and Luxembourg, but mainly because of Malta’s flexible yet robust regulation and reputation as a world-class centre for hedge fund services.

#Launching an incubator hedge fund trial

In some cases, a fund company may test several funds in an incubation trial with the best performing funds advancing. According to Finance Malta, the public/private initiative aiming to promote Malta’s financial services centre: “Whilst Malta may be the smallest European Union member state, it has developed a significant financial services sector and, within that, a growing hedge fund business. An incubated fund is usually launched with a specified trial period.

The sector should get a significant boost from Europe-wide regulation of the industry, as well as the preference for start-up managers to choose a jurisdiction that offers flexibility and responsiveness, tempered with pragmatism.” Malta’s professionals report that they have begun to win business from the more established fund jurisdictions.