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

Established in 2015, and with a portfolio of close to half a billion euros, Malta’s National Development and Social Fund (NDSF) is tasked with managing 70 percent of the reserves gathered by the island-nation’s Individual Investor Programme, and to spread this wealth for the “social well-being of the nation”. The wider adoption of the instrument, says the NDSF’s CEO, could bring about far-reaching benefits to the Eurozone, including economic stability.

Appointed as CEO of the NDSF in 2017, following a public call for applications, Raymond Ellul joined Malta’s Sovereign Wealth Fund after a career of 36 years with Bank of Valletta – where he held a number of senior management appointments – the most recent being Head of Investment Strategy and Foreign Bank Relationships. Mr. Ellul is also a visiting senior lecturer at the Faculty of Economics, Management and Accountancy at the University of Malta, where he qualified with First Class Honours in BA (Hons) in banking and finance. He holds an MBA from Henley Business School, University of Reading.

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.

Preparing for Tomorrow



“I think that sovereign wealth funds have a very important role to play, actually, especially in Europe.” Raymond Ellul, CEO of Malta’s National Development and Social Fund.

“Normally governments are more concerned on the day to day issues”, says Ellul. “But having an agency which has a long-term view obviously gives space for better long-term planning and sustainability. What we try to achieve at NDSF is economic, environmental, and social sustainability in what we do.”

Sovereign wealth funds, particularly those like the NDSF which are guided by the Santiago Principles – the 24 internationally accepted guiding practices and principles endorsed by the International Forum of Sovereign Wealth Funds, and supported by the IMF – should invest as much as possible “pro-cyclically”, he emphasises.

“When things are not going well, or countercyclically, [this means] we’ll be able to continue the pace of growth. Maybe not at the same level, but at least growth does not stop.”

Besides the Fund’s core objectives to spread wealth across society and invest in sectors that provide essential services to citizens, managing the fund in this responsible way helps provide a safety net for the country. Essentially, money put aside for a rainy day, or “peace of mind”, as the CEO puts it.

“Not all income generated on a national level is spent, there is an element of savings, there is an element of development, and there is a large element of social wellbeing.”

While investments in Malta include an array of projects aimed at rejuvenating infrastructure, improving schools and hospitals, and providing social housing, as well as strategic investments in local securities, a growing part of the NDSF’s strategy is also to look abroad given the island’s small size.

Going Global

“We’d like to diversify our investments,” says Ellul. “Ultimately, the major part of investments will be foreign because of the problem of not finding enough local securities in the market. We would also have to look at foreign portfolios and create other funds with institutional investors abroad.”

The CEO underlines that the NDSF will steer well clear of speculative markets, and only invest in major economies to reduce the risk to the fund’s portfolio.

“Our investment policy is quite clear, we have investment restrictions, both by issuer and even on the issues themselves. We’re not going to invest in companies which produce armaments, for instance. We have taken a conscious decision to be a passive investor. Historically, sovereign wealth funds, especially after the financial crisis, were criticised. They were accused of shareholder activism and therefore, they invested with the purpose of controlling that entity. But with the Santiago Principles, things have started to change.”

However, in Europe at least, there seems to be an element of reticence surrounding sovereign wealth funds – demonstrated by the fact that there are only fifteen in the EU, making up only a fraction of the 114 established worldwide. Nevertheless, the NDSF chief believes that the Eurozone would be strengthened if more EU countries were to adopt their own funds.

“I think it would add economic stability to the region, it would also allow for better financial planning, and it might reduce the burden on the EU budget as well, including a reduced dependence on taxation to fund certain projects”, he says.

“Sovereign wealth funds are not secret organisations at the end of the day, their main shareholder is the government itself in many countries. I think that sovereign wealth funds have a very important role to play, actually, especially in Europe.”

Looking ahead – and as long as Malta’s IIP continues to flourish – funds administered by the NDSF are likely to grow towards the one billion mark. This would not only bring about substantial benefits to Maltese citizens today, but would reap rewards for the country’s future generations as well.

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South EU Summit's editorial team is comprised of an international team of journalists and communication specialists with wide-ranging areas of expertise. We pride ourselves in developing firsthand content, and undertaking personal interviews with the most influential players in each market.

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