There should be good opportunities in 2020 and beyond for AIFMs, with external management of RAIFs an increasing source of business, which is a much cheaper option than an internally managed fund.
What key areas of opportunity or growth do you see in your sector, and what are your expectations for Cyprus in 2020?
As the effects and negative publicity of the banking crisis of 2013 subside and barring any further negative self- inflicted shocks, the standing of Cyprus as a fund and fund management centre should increase. Cyprus can take advantage of the political issues that Malta is facing, which has substantially affected their repute and also their focus on gaming and blockchain industries, to the detriment of their fund industry. This gives Cyprus a chance to put itself forward as the preferred alternative choice to Luxembourg and Ireland.
There is still a long way to go for Cyprus to be considered an equivalent of Luxembourg and Ireland, especially for larger funds that require the ‘domicile brand’ to be able to sell internationally and to institutional investors. However, there is an attraction for European and international fund initiators and promoters to launch in Cyprus, especially where the domicile is not important for marketing purposes, as they may already have a captive group of investors.
Reasons why they may select Cyprus include; a well-educated workforce and a plethora of service providers, such as AIFMS, auditors and law firms, lower costs from most service providers plus a government and regulator wanting to grow the industry with new products and a favourable tax environment.
Challenges which are well known in the industry, are the issue of depositaries, and the lack thereof of rated large European or international institutions who are willing to invest in a small market. The current local banking suppliers and smaller depositary firms that have launched are not of the required financial standing or prestige required for a fund to attract international investment; the regulation for Fund Administration services must be implemented; time of approval of AIFs and UCITS must be shortened and a change in the Company law underpinning funds to give voting rights to fund investors rather than holders of management shares must be looked at. Such change would bring the fund offering in line with Luxembourg and Ireland.
Despite the above, the successful implementation of the RAIF structure has spurred a growth in funds as it overcomes the main issue with the launch of a fund, being the time for approval. The fund management industry in Cyprus is expected to continue its upward trend in 2020 in line with the growth of the past few years, with RAIFS.
There should be good opportunities in 2020 and beyond for AIFMs, with external management of RAIFs an increasing source of business, which is a much cheaper option than an internally managed fund. Third party fund management is a growing industry with many funds deciding to outsource both or either of portfolio management and risk management to show investors that there is third party oversight of their fund.
The Cypriot economy seems to be on a good footing, however, the government must adopt a long term view and invest in roads and infrastructure and look at ways of increasing the attraction of the island both for tourism and as a place of residence.