Show Case
Here we showcase the setting up of a Money Market Fund in Mauritius to demonstrate the competitiveness of Mauritius as an International Financial Centre for establishing an open-ended fund (CIS) investing in Africa.
Why a Money Market Fund?
Money market funds, known for their liquidity and low-risk nature are major components of many investment portfolios, therefore a perfect fit as an investment strategy that will allow investors to subscribe and redeem at regular intervals, thus easily classified as an open-ended fund. Additionally, since money market funds specialise mostly in short-term securities such as treasury bills, certificates of deposit (CDs) and commercial paper, they offer a secure haven for investors seeking stable returns amidst market volatility.
Why Mauritius You May Wonder?
Picture this: an idyllic island boasting not just natural beauty but also a robust financial ecosystem for offshore investment structures. Since the performance of a money market fund is highly dependent on the interest earned on the securities they hold, fund managers can capitalise on various benefits such as the reduction of withholding taxes (WHT) on interest and dividends through the tax treaties Mauritius has in force with 44 countries.
The key aspects of the tax regime that should apply to a money market fund approved as an open-ended fund (CIS) in Mauritius by a foreign promoter/fund manager to invest outside of Mauritius:
- An exemption of 95% of the interest income earned, subject to meeting the substance criteria; or
- credit for tax suffered on the interest income.
The categories of CIS:
Since the money market funds will be targeting mainly foreign individuals and institutional investors and will invest abroad, the fund managers will likely choose between a Global Scheme, Expert Fund or Professional CIS.
Key characteristics of the types of CIS mentioned above:
Global Scheme: similar to a retail scheme will involve the investment of capital subscribed mainly by individuals either through private placement or on a stock exchange.
Expert Fund: this scheme is targeted at Expert or Sophisticated investors as defined in the Securities Act 2005. The Expert Fund also benefit from exemptions from certain provisions of the regulations, making it a more flexible and accommodating type of fund for expert investors.
Professional CIS: This type of CIS will target investors by way of private placements only and/or to sophisticated investors only. This scheme will allow the fund manager to hold more than 10% of illiquid assets combined with the fact that a long lock-in period can also be included to allow fund managers to potentially maximise gains over a certain period of time.
What is an Expert investor?
According to the Securities Act 2005, an Expert Investor is an investor who makes an initial investment of at least USD100,000.
A Sophisticated Investor means:
- the Government of Mauritius
- a statutory authority or an agency established by an enactment for a public purpose;
- a company, all the shares in which are owned by the Government of Mauritius or a body specified in (b);
- a bank;
- a CIS manager;
- an insurer;
- an investment adviser;
- an investment dealer; or
- a person declared by the FSC to be a sophisticated investor.
