By Flora Alexandrou
The primary goal of the Cyprus Investment Funds Association (CIFA) is the promotion and development of the Cyprus funds and asset management industry in order for Cyprus to become a jurisdiction of choice for international funds.
Despite its relatively recent establishment in 2013, CIFA already counts more than 240 corporate and individuals among its members.
“CIFA’s establishment was a natural development of the progress made in promoting Cyprus as a competitive investment funds jurisdiction,” CIFA President and Chairman and Head of Tax and Corporate Services at KPMG, Angelos Gregoriades, told the Cyprus Weekly.
“This initiative was and still is supported by the Ministry of Finance and the Cyprus Securities and Exchange Commission (CySEC).”
Growth despite the local crisis
The fund sector in Cyprus started to accelerate following the enactment of the Alternative Investment Funds (AIF) law and the transposition in Cyprus of the Alternative Investment Funds Manager (AIFM) Directive in 2013.
“The sector is gaining significant momentum from both local and international promoters, with an increasing number of new applications for the set-up of investment funds and fund managers already recorded,” Gregoriades said.
Moreover, the funds sector, which includes funds under the EU-regulated Markets in Financial Instruments Directive (MiFID) and the Undertakings for Collective Investment in Transferable Securities (UCITS), has also side-stepped the local Cypriot financial crisis.
“It is important to note that the Cyprus financial sector has experienced stable growth during the last five years, which is reflected in the number of registration of MiFID firms and asset management companies (both UCITS and AIFMs), as well as alternative investment funds,” he adds.
CySEC currently supervises over 200 Cyprus Investment Firms and 150 Service Providers, as well as the Cyprus Stock Exchange, 81 listed companies and 12 issues who are listed in foreign markets. Assets under management are growing, with around 35 fund managers managing portfolios of €20.3 billion under CySEC’s supervision. The number of UCITS and Alternative Investment Funds and Alternative Investment Funds with limited number of persons (AIFLNPs) is also on the rise.
“As you may appreciate, this sector employs a large number of professionals, and taking into account its constant growth, more job opportunities will be created. We aspire that Cyprus will continue to evolve to offer a variety of fund products to ensure it meets the industry’s needs,” he says. Other important key drivers to success, he notes, are innovation and a strong spirit of collaboration.
Location and EU membership
Gregoriades says that Cyprus’ niche is its strategic location and its EU membership.
“Social and demographic trends make it highly favourable for Cyprus to play an important role as a regional fund centre of excellence,” he said.
According to Invest Europe’s European Private Equity Activity report for 2015, fundraising activity alone amounted to €47.6 billion, with the main investors committing to European Private Equity Funds being based in the Middle East and Asia. “Just by looking at a map, any fund manager operating from Cyprus can reach countries in the Commonwealth of Independent States (CIS) and the Middle East and North Africa region (MENA), with a population of nearly 700 million and countries that are achieving positive GDP growth rates,” Gregoriades notes.
New amendments in October
Work to promote Cyprus is ongoing. In cooperation with a leading international firm, the CIFA board has prepared and is now implementing an action plan.
The project included a thorough review of the current legislation and regulatory framework.
“It is imperative that, in order to enhance the attractiveness of Cyprus as a competitive investment funds destination, the suggested amendments relating both to the AIF and AIFM legal framework need to be adopted and we anticipate this to be completed by October 2016,” said Gregoriades. One amendment relates to qualified AIF fund managers.
“The monitoring of such Registered AIFs will be exercised by the fund manager, who will be a qualified Alternative Investment Funds Manager and meets certain requirements,” he adds.
It will also be possible to operate a partnership structure, which will give the option to the general partner to opt for legal personality upon establishment, while maintaining the tax transparency status.
“The amendments also introduce a new category of authorised managers – ‘mini managers’ – which will further enhance Cyprus’ competitiveness,” he explains.
Another important development, says Gregoriades, is the adoption of legislation on funds administration, which introduces stricter corporate governance rules. Efforts should also focus on ensuring that Cyprus remains a competitive jurisdiction with an attractive tax regime, he believes.
Cyprus needs to be ready
Asked if Brexit presents an opportunity for Cyprus, Gregoriades said: “It is too soon to comment whether opportunities will arise from Brexit, since the conditions that will apply to the UK’s exit from the European Union have not been decided”.
The UK referendum vote to leave the EU has sparked uncertainty in the fund sector, as it is not yet clear if UK-established funds will continue to enjoy benefits relating to the distribution of investment products.
However, Gregoriades believes Cyprus should be ready whatever happens.
“Cyprus needs to be ready to benefit from any opportunities that may arise and this can be done by enhancing its regulatory framework via the adoption of the aforementioned amendments to the legislation,” he said.