Maintaining the investment fund sector’s good reputation, professionalism and careful supervision are what it will take to reach the goal of €25 billion in Assets Under Management, says CIFA President Andreas Yiasemides, who proudly admits that Cyprus is currently one of the fastest-growing destinations for investment organisations and fund managers.
How would you describe the investment funds sector today, after a prolonged period of uncertainty and difficulties caused by the pandemic?
The Investment Funds sector in Cyprus has proven resilient as it was significantly strengthened during 2021, even though the pandemic and the issue of uncertainty continued to have an impact. The industry is now established as one of the most promising of the Cypriot economy. Assets under Management (AuM) of Cypriot investment funds amounted to €11.6 billion at the end of the third quarter of 2021, proving that Cyprus continues to be one of the fastest-growing destinations for investment organisations and their managers. On an annual basis and during pandemic conditions, AuM increased by 48.7%. Over the last couple of years, dozens of fund managers from various geographical areas have chosen Cyprus, recognizing the remarkable advantages that it offers as a destination.
What are CIFA’s expectations for 2022?
We were optimistic before the Ukrainian crisis and had clear indications that the upward and sustainable growth would continue in 2022. At the end of the third quarter of 2021, the total number of licensed Management Companies and Undertakings of Collective Investments was 298. About 50 more licensing applications are pending approval from the Cyprus Securities and Exchange Commission (CySEC). Of course, from licensing to actual operations takes some time but we are optimistic that the sector’s pace of growth will continue. As long as we maintain the sector’s good reputation, professionalism, and careful supervision, the goal of reaching AuM of €25 billion is feasible.
The Collective Investments sector is growing internationally and competition is fierce. Is Cyprus in a position to attract well-known, sizeable investment funds and established fund managers?
The legislative and tax framework that governs Collective Investments in Cyprus is the equal of that in other European destinations. On the contrary, the cost of establishing and operating such organisations from Cyprus is much lower than in other competing EU destinations. This is why, even though Cyprus is a relatively new jurisdiction for funds, about 50% of the Cypriot Investment Funds’ net assets relate to cross-border investments. The country has the fourth highest percentage in Europe, with only Ireland, Luxembourg and Malta ahead. As a result, we observe managers from various geographical locations choosing Cyprus as their new base, taking advantage of the EU framework and our proximity to the MENA region.
The enactment of legislation that will govern the supervision and regulation of the fund administration services profession will complete the sector’s legal framework, providing an additional level of security to both investors and managers. The new law will allow us to attract more international fund administrators and expand the industry by attracting international groups and companies to Cyprus. It will also help existing fund administrators provide more international services and consequently positively impact the whole industry. At the same time, we are not complacent. The Association evaluates global developments in the sector and submits improvement suggestions to CySEC where necessary.
Are investment funds still investing in the local economy?
Yes, they are. Fund managers are always in search of good investment proposals for the investment funds under their management, especially in the same country in which they are established. We cannot force fund managers to invest their clients’ money in Cyprus but, fortunately, significant investments have been made in Cypriot projects and companies so far. Almost 140 collective investment organisations invest in Cyprus in part or entirely, with the total amount reaching €2.3 billion at the end of the third quarter of 2021 (19.5% of total AuM).
With the proper implementation of the country’s Recovery and Resilience Plan, we expect to see more funds investing in Cyprus in the sectors of Renewable Energy and Energy Transition, Education, Health and Hospitality. Investment funds will fuel the country’s path towards sustainable growth and development.
How are you planning to attract more funds and managers to Cyprus?
It is a team effort. Along with Invest Cyprus, we will continue through targeted actions to promote the sector in specific markets. We are targeting managers who are seeking an EU base from where they can implement their strategy with confidence and have exceptional support services. At this stage, we are not only after fund managers. We are trying to attract other significant industry players, such as international custodians, depositories and administrators. Hopefully, we will soon be able to announce some important news regarding this vital aspect that will elevate our industry to a new level. Today, Cyprus ticks all the boxes and is gaining momentum in the world of collective investments. We are determined to make our proposition even more attractive without jeopardising the sector’s reputation.
Is the situation in Ukraine threatening the sector?
The situation in Ukraine will certainly impact the efforts of the global economy to recover from the shock of the pandemic. The global economic implications of the conflict remain hard to figure out. The size and the duration of Western sanctions and any counter-sanctions from Russia will determine the overall impact on the global economy. So far, we have seen stock markets reacting sharply and the price of commodities like oil soaring, a trend which is expected to continue as the situation develops. We hope that short-term consumer and business confidence and market volatility will be the only effects but it is still too early to assess the situation entirely. It is evident that Collective Investments with exposure to Ukraine and Russia will be negatively affected. As expected, there is also a shift towards traditional safe havens such as government bonds and gold. It is challenging and investment managers and investors must remain calm and wait until the reality of the situation is more apparent.