On an annual basis, and in the midst of a pandemic, the assets under management of investment institutions in Cyprus increased by 48.7%, with the assets under management of Cypriot investment funds reaching € 11.6 billion at the end of the third quarter. of 2021.
The data show that the sector is evolving into a strong pillar and is gaining ground in an industry with intense competition.
“Although we are still a relatively small jurisdiction, however, everyone recognizes the dynamics that Cyprus has developed in recent years, without this being an excuse for complacency,” said the president of the Cyprus Investment Funds Association, Andreas Giasemidis.
The effort to grow the sector further is reinforced by the new incentives that came into force on 1 January.
“It is no exaggeration to say that the Cypriot 'proposal' for international organizations is now one of the best in the EU”, notes Mr. Giasemidis.
The pandemic generally favored the collective investment sector, as the net assets of investment funds in Europe increased from € 15.7 trillion. in the first quarter of 2020 to € 20.8 trillion. in the third quarter of 2021.
-The numbers show that the Funds sector is growing. What is the biggest difficulty in the development of the sector?
Indeed, the investment fund sector is constantly growing in Cyprus, even in difficult conditions such as those created by the pandemic. With the assets of the Cypriot investment funds under management reaching € 11.6 billion at the end of the third quarter of 2021, Cyprus has proven to continue to be one of the fastest growing European destinations for investment institutions and their managers.
On an annual basis, and in the midst of pandemic conditions, the assets of managed investment firms increased by 48.7%. Certainly, the effort made is not easy and there are many parameters that we must constantly take into account in order to continue this upward trend. For example, being on the same level or even better than the international competition in terms of operating framework, tax incentives and supervision.
Also, in the early stages we had to convince ourselves of the advantages of Cyprus over competing destinations with many years of tradition in the field. In the current situation, this effort becomes easier since we have attracted investment funds and managers from different geographical areas. Although we are still a relatively small jurisdiction, however, everyone recognizes the momentum that Cyprus has developed in recent years, without this being an excuse for complacency. On the contrary, we must continue our efforts to further increase the collective investments, but also of their managers.
-In the markets there is a strong volatility. How does the pandemic affect investment decisions and the Funds sector in general?
Certainly the pandemic created a lot of uncertainty and obviously suspended some investment decisions. However, we believe that it has made people turn more to collective investment, recognizing the benefits it offers. According to data from the European Funds and Asset Management Association (EFAMA), the net assets of investment funds in Europe increased by € 15.7 trillion. in the first quarter of 2020 to € 20.8 trillion. in the third quarter of 2021.
Both the assets of the Collective Investment Institutions in transferable securities (UCITS) and the Alternative Investment Organizations (AIF) showed a significant increase. The field of collective investment is now one of the largest in the world and at the same time has matured significantly. That is why we believe that it will continue to grow.
Cyprus offers high quality services, has a modern legal framework, strong supervision by the Hellenic Capital Market Commission and very competitive costs of establishment and operation. That is why we firmly believe that it deserves a significant share of this development.
The new motivations
Do the new investment incentives and the headquartering campaign have an impact on the investment fund sector?
This decision of the government is certainly a very positive development, as it is a targeted incentive that aims to create significant added value for the entire economy. We understand that although the incentives only came into force on 1 January, they seem to have already generated significant additional interest from / to international groups.
Certainly, the strengthening of Cyprus as a destination for large international companies, something that has been strongly promoted in recent years by both the government and the Invest Cyprus organization, will have positive effects in the field of investment funds, which is still in its early stages. It is no exaggeration to say that the Cypriot “proposal” for international organizations is now one of the best in the EU. We must make the most of it in order for the efforts of rapid and sustainable development to bear fruit. At the same time, we must protect it properly so that issues of credibility for Cypriot jurisdiction do not arise again.
-Do the funds that have been established in Cyprus invest in the country?
Although Cyprus is considered a cross-border hub for investment funds, with a very high percentage of organizations licensed in Cyprus to invest in other destinations (approximately 45-50%), we note with satisfaction that a significant percentage of their investments are made within of the Republic of Cyprus with a great impact on the Cypriot economy.
These are investments that act as a substitute or complement to bank lending and to date have exceeded € 2 billion in various sectors, such as shipping, renewable energy, education, technology and real estate. We are optimistic that as the sector grows, so will the investments in projects and companies in Cyprus, since, of course, the managers of these organizations consider that these are profitable investments.
The stock market
-The Cypriot capital market (stock market) fails to “excite” investors and companies. What is missing; How can the volume of transactions and the depth of the market be increased?
First of all, it is worth mentioning that the Cyprus Stock Exchange can keep the registers of Alternative Investment Organizations or Collective Investments whose shares are not traded. A very important service in the context of our efforts to attract funds and managers in Cyprus. Regarding the role of the Stock Exchange in the Cypriot economy, it is a fact that it could be much bigger since the country is considered a financial center.
Possibly, through the privatization process and the entry of a strategic investor in the coming years, the data will be differentiated. As well as the possibility of granting some targeted tax incentives, we may have noticed an increased interest in joining new companies. We must also always keep in mind that the majority of investors in listed companies in Cyprus are not professional investors, but small investors, who acquired shares in various companies several years ago.
-The development of entrepreneurship and start-ups is high as a priority. Various incentives and measures have been put in place, but one important element is missing: Financial resources. Funding is required at all stages of start-up development. Experience from other countries shows that this money comes from specialized investment funds. Is it possible to see in Cyprus Funds that focus on start-ups?
Certainly, in recent years Cyprus has been developing the start-up sector through various initiatives, both public and private. Indeed, the issue of funding is the main one facing these organizations, which in essence have an idea which they develop up to a certain stage. In addition, they really need money to develop it and eventually “commercialize” it to start seeing revenue.
Investments in these organizations usually come from specialized investment vehicles that specialize in such investments, it is enough to convince them that their business model and financial proposal will be viable and profitable when developed.
In an environment of complete globalization, we believe that the issue is not whether we will attract the so-called Venture Capital Funds to Cyprus, but to make visible the Cypriot start-ups in these investment organizations, wherever they are based.