First to launch UCITS in Cyprus and with €46 million in assets under management, innovative fund manager GMM Global Money Managers sees a big future for Cyprus’ fund industry.
Why did you choose to set up in Cyprus over other established EU fund jurisdictions?
Cyprus has created an interesting environment for Undertakings for Collective Investment in Transferable Securities (UCITS) quite recently and is a business friendly location to set up operations. When we started looking at Cyprus as an option, there was virtually no activity in terms of UCITS, although the regulation was in place. In terms of UCITS, Greece is more of a mature market with more competition, whereas Cyprus was a virgin market with great prospects. From a business point of view, we saw this as an opportunity to be at the forefront in launching activities in the UCITS market and to establish GMM as a key player in the Cyprus fund industry. The natural link between Greece and Cyprus, both culturally and linguistically, was also a deciding factor. The determination of the Cyprus Securities and Exchange Commission (CySEC) to promote the country as a fund jurisdiction is reassuring and the flexibility and access they provide is a clear advantage for business. We were the second UCITS company to be authorised in Cyprus, but the first to register funds.
How many funds do you have under management and what is the total value of assets?
We have 16 funds at the moment, 14 of which are under one umbrella, with a total value of around €46 million and we are in the process of setting up more funds. So far business has been going well and we have seen a steady increase in our assets. Considering that we have been active for just under a year in Cyprus, this has been excellent progress.
UCITS are your main product, what other related products and services do you offer?
UCITS are the European equivalent of Mutual Funds, which are considered one of the most efficient asset management tools globally. We have a UCITS licence, so we are a UCITS management company, but the law also allows us to act as an Alternative Investment Fund (AIF) manager after licence from CySEC. The new legal framework for AIFs has now been passed in Cyprus and we will take advantage of this to broaden our business and product range. We are focused on achieving wide diversification of investment risk in international money markets and capital markets and have an extensive range of investment options from small to large portfolios of private and institutional investors. UCITS are still relatively new to Cyprus, as there is much more experience in AIFs (formerly called ICIS). Until recently, there was no market for Cypriot government bonds or assets, and bonds were used primarily as a savings tool instead of an investment tool. Gradually, the UCITS market will grow, but the setbacks in the Cypriot banking sector over the last year have not helped. We want to raise awareness about UCITS funds and the benefits of investing in global markets.
GMM is a pioneer in the sense that your funds were the first ones to list on the Cyprus Stock Exchange (CSE). What led to this decision and what advantages does the CSE offer?
We were the first ones, however although listed, we are not traded on the CSE. We chose to list on the CSE because being listed on a recognised and official stock exchange of an EU country reflects to investors that we meet specific criteria. Another advantage is that our daily prices and data are published through an organised market, which in turn gives us more credibility and transparency. Additionally, listing funds on a recognised exchange usually means investors can get some lending value from their units.
What key advantages does Cyprus have as an EU fund jurisdiction and what markets should the country target? Do you think it is feasible for Cyprus to establish itself as a top fund centre?
Cyprus is an emerging centre for both UCITS and AIFs. The strong will that Cyprus’ authorities are showing to boost this sector is a real advantage. Cyprus is a small economy with a small stock exchange, but in terms of a fund industry Cyprus can be something big. Evidence of this are other small economies with thriving fund centres, such as Malta and Ireland. Cyprus could become just as, if not more, successful over time. There is a lot of excitement surrounding the burgeoning fund industry in Cyprus at the moment, which is encouraging for business. The country has other strong economic sectors, but due to the small size of Cyprus there are limits on how big these industries can grow, whereas the fund industry is not restricted to these limitations and has great potential to become a driving force of the economy. Other key advantages are Cyprus’ EU membership, its location between three continents and access to these markets. The cultural and geographical proximity to the Middle East is also a key advantage, as investors from this region feel welcome in Cyprus. Bureaucracy is usually the big fear for many businesses, but in Cyprus our experience is that things move forward fast and with ease. There is great potential for Cyprus to become a top fund centre.
GMM also markets White Label Funds, which are essentially tailor-made funds. Have you seen much interest in this and what kind of branded umbrella funds are most popular?
White Label Funds are part of our product range, and we are seeing some interest already. However, setting up White Label Funds demands a significant investment of around €1.5 million and are usually aimed at professional bodies, such as investment services firms wanting to create tailor-made products for their clients. There is definitely a market for White Label Funds, as some clients want to invest in very specific ways and might not find a suitable existing fund.
Cyprus has been working hard to restore investor confidence following last year’s bailout, how would you reassure investors looking to set up funds in Cyprus and what kind of investment potential do you see in the country?
I believe the worst is over and I can already see evidence of the Cypriot economy bouncing back. The government has strong cooperation with the Troika and has come out with good results from all the reviews so far. Although a devastating experience for Cyprus, the economic adjustment programme is helping to build stronger foundations that will support the growth of the fund industry. Also the fact that Cyprus returned to the international markets much sooner than expected has been a positive sign. Markets across the EU are still fragile, especially in Southern Europe, but things are definitely moving in the right direction with projections of Cyprus returning to growth in 2015. These factors make this an opportune time for investors to enter the Cypriot market – we also recognised this potential and made the decision to set up operations in Cyprus.
How do you see the fund industry in Cyprus developing over the next five years?
The fund industry will grow, but at what rate is very much linked to the overall economic recovery of Cyprus. However, coming from Greece, I must say that Cyprus has done well so far. In terms of developing the fund industry there are many tried and tested examples from other fund jurisdictions that Cyprus can look to – and then adopt and improve on them. Cyprus has great prospects of creating a new regional market, with its proximity to the Middle East and other countries in the region. Cultivating its relationships and ties with these markets, Cyprus could offer investors ideal access to EU markets and beyond. Also the strong business relationships between Cyprus and CIS countries and Russia could be expanded further in terms of investment funds. There are still some challenges to overcome, but the country has been moving in the right direction on a macro-economic level and I see an exciting future for the fund industry in Cyprus.
Alex Kartalis is the General Manager of Global Money Managers Ltd. Greek-born Kartalis launched his career at Citibank Athens, where he worked from 1994 till 1997, after which he worked at BNP Paribas Securities Services Athens, initially as Head of Securities Operations and then as General Manager until 2012. From September 2013 Kartalis has been the General Manager of GMM Global Money Managers Ltd, a Cypriot mutual funds management company. He graduated from the Department of Statistics of Athens University of Economics and Business (ex A.S.O.E.E) in 1991 and in 2003 he got an MBA in Finance from Ecole Supérieure de Commerce et Management (ESCEM).