Although it is no more than ten years old, and in spite of the unprecedented consequences of the Covid-19 pandemic, the fund industry in Cyprus has become one of the most dynamic and rapidly growing sectors of the island’s economy. We are witnessing formidable momentum, with assets under management rising from €2.7 billion in 2016 to nearly €11 billion over the first half of 2021 – a rather significant figure, considering that the country’s GDP is circa €21 billion.
As the global economy undergoes a restructuring following the pandemic, collective investments are becoming an increasingly popular choice among investors who seek to diversify their portfolio and benefit from professional management and favourable returns. As this new environment unfolds, we are optimistic that the increasing trend in the inflow of funds and fund managers to Cyprus will continue at an even higher pace. We continue with the same commitment to establish an even more transparent and efficient taxation regime and provide incentives for relocation of funds and fund managers.
As a result of CIFA’s initiatives, the industry is extending its footprint in countries such as India, a promising target market. India’s Ministry of Finance recently classified Cyprus as a Category I country for the purposes of Regulation 5 (a) (aiv) of SEBI (Foreign Portfolio Investors) Regulations. According to these regulations, appropriately regulated funds and unregulated funds whose investment manager is appropriately regulated and registered as a Category I Foreign Portfolio Investor are subject to lighter KYC requirements and enhanced trading limits and are also eligible to invest in ODIs.
In addition, Greece is a country with which Cyprus has traditionally had tight bonds and as such constitutes a key target market, which is sensible due to the two countries’ proximity. The same also applies to Israel, for which Cyprus would be an optimal option for acquiring access to the EU through passporting rights. In general, Cyprus is an ideal option for investment to and from countries in the Middle East area.
At a regulatory level, more legislative updates are expected to come into force soon. The continuous modernisation of our legal framework will reinforce even more the already well-rounded framework governing funds in Cyprus. Parliament is in the process of passing a legislative act aiming towards the supervision and regulation of the fund administration services profession. The law is expected to set high standards and provide extra comfort to fund managers and investors.
Amendments in the existing tax legislation are expected to come into effect within months, providing additional incentives to establish funds in Cyprus, such as the possibility of a fund to choose NAV-based taxation for its investors and the right for Registered Alternative Investment Funds to acquire loan portfolios. Legislative amendments are vital in sustaining the country’s competitiveness and commitment to stay at the forefront of developments. CIFA’s efforts are apparent as we strive to offer to the industry and our members the necessary tools to accomplish their strategic targets.
Our medium-term target at CIFA is to increase Cyprus’s funds under management to €25 billion and attract key worldwide fund industry players, such as fund managers, custodians and others. We remain prudent, realistic and consistent but, at the same time, optimistic and confident.
By Andreas Yiasemides, President, Cyprus Investment Funds Association (CIFA)
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