Insights | 30 March 2021

Maria Clappa , Partner at Tassos Papadopoulos and Associates LLC

Thematic Exchange Traded Funds (ETFs) are experiencing record growth globally as investors want to capitalise on clean energy and technology. Demand for specialised ETFs will likely increase in Cyprus too, although these funds might not necessarily be traded on the island, says Maria Clappa, Partner at Tassos Papadopoulos and Associates LLC.

Could you tell us about the evolution of the investment funds practice at Tassos Papadopoulos and Associates LLC and highlight your experience and expertise in the investment funds segment? 

We are a full-service law firm providing legal services across all areas of the law, including advice and support in the financial services domain, both from a regulatory as well as from a corporate law perspective. We started developing our expertise in investment funds, again, from a regulatory as well as a corporate law perspective, soon after Cyprus decided to make the sector a strategic priority and brought in the Alternative Investment Fund (AIF) and Alternative Investment Funds Manager (AIFM) legislations. Delving into the Alternative Investment Fund and Alternative Investment Funds Manager legislations was a natural progression for me because of my financial services background. My fondness of, and faith in, these structures certainly help when working to gain expertise. 

But the biggest, and at the same time exciting, challenge for us lawyers is that the legal services funds and fund managers require are not limited to the fund formation, corporate law matters and regulatory framework issues, but are also related to intellectual property matters, data protection, anti-money laundering, employment law, even litigation and dispute resolution, as well as many other areas pertaining to the fund’s business and investments. Clearly, no single lawyer can satisfy all necessary assistance and a team of lawyers is required. At Tassos Papadopoulos & Associates LLC, we are fortunate to have the requisite skills and expertise within our team. 

The Covid-19 pandemic has had a profound impact on the global investment funds industry. Based on your experience, has the crisis acted as a dampener on fund activity or has it created new opportunities?

The pandemic affected business in all industries across the globe, and the fund industry is no exception. The first reaction to the pandemic in the spring of 2020 was to freeze and hit pause. New investments were halted, some even abandoned. Expansion plans were put on hold, and most of the business world sat back, taking measures, preparing for the worst. This certainly had an impact on fund related projects that were 'in the works' at the time. 

The attitude in 2021 is very different. Although the pandemic is far from over, business has resumed albeit with the constraints and restrictions that are faced globally. The adjustment to 'the new normal', hopefully a very temporary one, being the driver. 

It sounds like a cliché, but there are opportunities in crises. Perhaps the biggest opportunity of all was to have time to stop, step back and reflect. The result of this period of reflection is that we are now seeing a new level of creativity and resourcefulness that is being translated into new business, concepts, structures and deals.

What fund types do you believe will be most in demand in Cyprus in the future?

Cyprus is a relatively young investment fund jurisdiction, so it is inevitable that global trends will soon be translated into local demand. Over the past few months, the majority of investments in the US have gone into Exchange-Traded Funds (ETFs), these being more thematic-based in equities related to clean energy, water or tech. Whereas funds would, in the past, be more sectoral, they are now focusing on subsets of sectors. Graphs depict an exponential growth in ETFs over the past 20 years with a big spike in 2020. My expectation is that the increased demand for ETFs will gradually flow into Cyprus regardless of whether these will be traded here or elsewhere.

From a legal and regulatory perspective, what makes Cyprus particularly attractive as a fund domicile? 

We have a legal system that is based on the English legal system as the laws that had been enacted applied to Cyprus the principles of common law and equity. Many of those laws are still in force today. After independence in 1960, the English legal system was largely preserved. Since Cyprus’ accession to the European Union in 2004, European law has supremacy over the Constitution and national legislation. This creates a particularly business-friendly environment, which, even for foreigners, is easy to navigate. Let me give you an example: 

Our Companies Law is based on the English Companies Act of 1948. Obviously, this law has been amended many times since its enactment to reflect changing practices in the commercial world and, of course, alignment with EU law. But its core principles have been maintained. Most people who have done business on an international level will have dealt with companies incorporated under laws based on the English Companies Act, which makes dealing with Cyprus-registered entities much easier and less of a novelty. 

In addition, the regulatory framework of financial services and funds is fully aligned with EU law. Our tax system offers numerous incentives and comparatively lower tax rates. The EU passporting system for banks and financial services companies enables firms that are authorised in any EU or EEA state to trade freely in any other EU/EEA state with minimal additional authorisation. Thus, Cyprus offers Cyprus-registered and licenced fund managers access to the EU Single Market, which is of great significance in today’s business environment. I think all these factors combined render the overall environment an appealing one as well as one that can be easily adapted to by anyone who is new to Cyprus. 

What effect did the introduction of Cyprus’ mini manager law have on the sector?

The enactment of the law was long awaited and very welcome, but it was a fairly recent move and the effect and impact of the new law has yet to be quantified. 

The AIFM Law only applies to those AIFMs whose assets under management exceed €100 million or €500 million where no leverage is used, and the funds restrict redemption rights for a period of at least five years. AIFMs that do not exceed these thresholds are known as Sub-threshold AIFMs, also known as Small or Mini AIFMs, and Mini Managers.

The enactment of the law eliminates any perceived risk that the previous lack of regulatory oversight in Cyprus for such Mini-AIFMs carried.

The aim was that the licensing and supervision of Mini-AIFMs in Cyprus will contribute to the clarity and effectiveness of the regime for start-up asset managers in the EU from Cyprus. At the same time, it allows for the licencing and operation of fund managers that intend to manage smaller scale investments with lower capital requirements and lower maintenance costs.

Investors are today often the driving forces behind domicile selection. What final message would you like to share about Cyprus as a fund domicile?

Cyprus is generally considered an attractive jurisdiction, in which it is easy to do business, because of its infrastructure, qualified personnel and its size. This is not only reflected in the straightforward and efficient processes that are clearly set out at the legislative and regulatory levels but also in terms of actual practice. 


Cooperation Partners
  • Logo for CYFA Cyprus
  • Logo for Cyprus International Businesses Association
  • Logo for Invest Cyprus
  • Logo for Cyprus In Your Heart
  • Logo for Cyprus Shipping Chamber
  • Logo for Ministry of Energy, Commerce, Industry and Tourism
  • Logo for Cyprus Chamber of Commerce and Industry
  • Logo for Cyprus Investment Funds Association
  • Logo for Association of Cyprus Banks