CYPRUS: AN EMERGING FUNDS JURISDICTION Marios Tannousis Board Member & Secretary
Cyprus as Business Expansion Platform In addition to the favorable tax regime, Cyprus offers many other advantages: Strategic geographic location (Europe Asia Africa); EU/Eurozone Member State; The legal system is essentially based on English Law; Financial reporting system based on IFRS; Business language is English; Open market economy with a highly qualified multi-lingual professionals and sophisticated business infrastructure to support the industry. 1
Global Trends (1) The funds industry has become very popular amongst investors as it provides a broader selection of investment opportunities. Overall the regulated openended fund assets increased by 6.8% during the fourth quarter of 2017 compared to the same quarter of 2016, reaching 44.3tln in value 2
Global Trends (2) During the fourth quarter of 2017, the worldwide regulated open-end fund net assets were dominated by 42% of equity, followed by 21% of bonds and 18% of balanced-mixed investments while the remaining 19% was allocated to real estate, guaranteed and other investments. The allocation remained stable since 2012. 3
In a new report Asset & Wealth Management Revolution: Embracing Exponential Change, PwC anticipates that global Assets under Management (AuM) will almost double in size by 2025, from US$84.9 trillion in 2016 to US$111.2 trillion by 2020, and then again to US$145.4 trillion by 2025 Alternative asset classes in particular, real assets, private equity and private debt will more than double in size, reaching $21.1 trillion by 2025, accounting for 15% of global AuM.
EU Trends The European funds industry has been growing since 2008 and during 2016 has reached 23tln of assets under management and 14tln of net assets. As per EFAMA, the ratio of assets under management to European GDP has reached 138% by the end of 2016 signaling confidence in the financial markets. Europe ranks as the second largest market in the global asset management industry, managing 31% of the total amount of assets managed globally at end 2015 (EUR 68 trillion). 5
CYPRUS Trends (1) The major milestone of recent years was the enactment of the AIF Law in 2014, which replaced and repealed the existing ICIS Law initially enacted in 1999. These developments have assisted in growing our industry during the last two years, and in the efforts to establish Cyprus as a jurisdiction of choice for asset managers both within and outside the European Union. The Cyprus regulatory authorities are continuing to work on further enhancements of the regulatory framework, which will further boost the growth of the industry going forward.. 6
CYPRUS Trends (2) The number of funds in Cyprus is increasing year-on-year at a compound rate of 18% per annum since 2014, reaching a total of 21 home-domiciled UCITS and more than 110 homedomiciled AIFs. In 2017, AIFs represented 94% of total net assets of the Cyprus funds industry. In the same year, a significant number of new funds were authorised and activated 7
CYPRUS Trends (3) Overall, the funds industry has evolved over the last decade to become a vehicle of investing in selected sectors of the global economy with a well-diversified risk. Its popularity is increasing amongst investors who are continuously adding pressure to fund managers for cost reduction and access to more diversified investments. 8
CYPRUS Trends (4) Cyprus is adapting to the transformation of the funds industry and it is expected that it will become a bigger player in EU, as evidenced by the encouraging net sales value in 2016 and 2017. The harmonization of the legal framework governing the funds in Cyprus with the EU regulations, along with the transition brought by the AIF law enactment has played a significant role in the evolution of the funds industry in Cyprus. Further enhancement with the 5 new bills that are expected to be enacted to the national legal order of Cyprus 9
Mission and Role CIFA s Mission is to: Act as the single unified representative body of the industry in Cyprus, representing the sector in economic missions to promote and support the development of the Cyprus Investment Fund industry; Provide support to its members in knowledge building; Encourage maintenance of industry standards and professionalism; Be engaged in the development of related regulatory aspects by being the back office knowledge centre of the Ministry of Finance and CySEC in collaboration with EFAMA; 10
CIFA Structure - The Board Members represent the whole industry 15 members, reputable industry professionals experienced in all aspects of the industry, including fund management, administration, advisory, banking, audit and legal Chaired by industry participants with direct experience and expertise in the related fields of the respective committee in which they participate CIFA BOARD OF DIRECTORS CIFA TECHNICAL COMMITTEES 13 Technical Committees: UCITS AIFs Committee Fund / Asset Management Committee Cyprus Investment Funds Distribution Committee Fund Administration / Custodian Committee Legal and Regulatory Committee Ethics and Risk Management Committe Tax Committee Statistics and Fund Research Committe Training / HR Committee AML Wealth Fintech 11
CIFA Technical Committees Our Technical Committees are engaged among other matters in: The identification of practices which may negatively influence the economic interests of fund managers and investors and suggest changes; We hold regular presentations in order to generate awareness of the funds industry in the Cypriot market; We have opened dialogue with universities, and are planning to do the same with IT companies for knowledge building; already universities are offering specific courses related to the industry while the University of Cyprus has successfully held seminars on promoting the funds industry; We seed continuously to increase our membership to support marketing efforts (currently we are over 200 members); We continue publishing relevant educational and promotional materials. 12
History and Recent Achievements 2013 2014 2015 2017 2018 February: CIFA is established April: CIFA was registered as an Association under applicable law. September: CIFA Newsletter is launched (issued on a quarterly basis with contributions from CIFA Members as well as government and regulatory authorities). December: CIFA Website is launched. January: CIFA Technical Committees are established; First official Members Meeting is held Application for EFAMA Membership submitted. April: Presentation to EFAMA Board for membership application. April: Engagement of KWM. September: Investment Fund Conference. EFAMA AGM in Limassol 21-23 June & 4 th International Fund Summit in September June: EFAMA Board approved application; granted Observer status. November: First AGM is held. 13
CURRENT PROJECTS Within the framework of increasing the visibility of Cyprus internationally as an investment hub and an attractive jurisdiction of the domiciliation and management of investment funds we are currently working on the below projects: Listing of Cyprus registered Investment Funds on the Thomson Reuters Platform The eligibility of Cyprus funds in Vestima (part of Clearstream Banking Luxembourg)
Milestones with EFAMA CIFA participates at the Conference of EFAMA in Nov. 2013 in Brussels CIFA applies for membership to EFAMA in Jan. 2014 CIFA presents to EFAMA Board of Directors Meeting in April 2014 in Brussels EFAMA delegation visits Cyprus in May 2014 meetings with Regulator (CySEC), Central Bank, Ministry of Finance and Minister of Communications and Works (member of CIFA) EFAMA grants CIFA membership (observer) in June 2014 at EFAMA AGM in Romania 15
Milestones with EFAMA EFAMA participates at the CIFA Inaugural event in July 2014 under the aegis of the President of the Republic at the Presidential Palace in Nicosia, Cyprus CIFA participates at the EFAMA Conference in Nov. 2014 in Brussels Mobilization of the CIFA 9 Technical Committees and adoption of EFAMA stands on key Fund and Asset Management Issues with the guidance of EFAMA (e.g. Ucits, AIFMD, legal and regulatory matters, investor education, ethics and risk, statistics and reporting, e.t.c.) CIFA begins in May 2015 reporting to EFAMA the figures and statistics of the Cyprus Funds and Asset Management Industry as per EFAMA standards 16
Milestones with EFAMA EFAMA participates and endorses the CIFA Cyprus Funds Summit in October 2015 in Nicosia, Cyprus with the aim to educate the local industry. Experts speakers from Overseas EFAMA participates and endorses 2 nd and 3 rd International Funds Summits Organized by CIFA in May 2016 and October 2017 Meetings with Central Bank and CySEC to streamline and report the quarterly and monthly statistics that are requested by EFAMA. 17
Funds and Asset Management industry key dates 1999 Enactment of the International Collective Investment Schemes Law 2012 Transposition UCITS IV 2014 Enactment of AIF Law which repeals the ICIS Law 2018 Five new important bills 2007 Transposition of MIFID 2013 Transposition of AIFMD 2016 Transposition of UCITS V 18
Further work to be done 19
Where do we go from here? Immediate Next Steps Government and the Attorney-General Office to fast track proposed legislation to remain both in line and competitive with other jurisdictions; CIFA on the other hand will continue to: Strengthen knowledge management to support the industry in light of EU developments and requirements in collaboration with EFAMA; raise industry awareness; upgrade the professional qualifications, the credibility, professional ethics and quality of services provided by its members. 20
Activity Area Membership in international bodies:
CIFA Memberships throughout the years 100% 90% 80% 341 70% 60% 50% 248 40% 30% 20% 10% 0% 220 107 Total Members 2014 2015 2016 2017
THANK YOU Marios Tannousis Board Secretary April 2018 www.cifacyprus.org