Fund Administration is a growing segment of the financial services sector in Cyprus. Melina Lori from our Cyprus office reviews the triggers behind this rise, what's on the horizon and how you can capitalise on this growth.
A phoenix from the flames
The Cyprus financial sector was rocked to its core by the financial crisis a few years ago. What followed was a big restructure of the financial sector as Cyprus consolidated, recapitalised and modernised its banking sector. The resultant increase in efficiency, security and transparency has seen an increase in foreign investment into Cyprus, particularly with respect to UK and Israeli funds.
Cyprus is becoming one of the fastest growing emerging investment centres in Europe and it's easy to see why: strategic geographic position and EU membership, stable political system, favourable tax system and modernised fund law. An existing workforce with financial experience and a low cost of living are creating an environment where the cost of maintaining funds in Cyprus can be upwards of 50% lower than some more established countries.
In 2018 the funds industry boasted a total of EUR 4.8 billion assets under management, a number that has tripled compared to 2008. The Cypriot government has recognised this growth area and is determined to stay at the forefront of industry developments while ensuring the industry meets the growing regulatory needs. This includes recent regulatory changes resulting in the full alignment of local legislation with the relevant EU Directives, including the Alternative Investment Funds Managers Directive.
The phoenix soars
So what does the future hold? There are still several regulatory initiatives underway and a significant effort from the Cyprus government and industry professionals to further enhance the product and services offered, and the regulatory frameworks within which they are offered. For example the Cyprus Stock Exchange (CSE) took the initiative to introduce a Regulation (63/2019), allowing it to undertake and maintain in its Central Depository and Central Registry, the Registries of Funds (AIFs and UCITs). Consequently, Non-Listed/Traded Funds can submit their Registries for handling to the Cyprus CSD (Central Depository and Central Registry) through its web portal. This service is offered to Fund Managers, Administrators and Investors that can electronically handle registry services and automate corporate actions through the CSE.
Another recent development is the cooperation between the Cyprus Investments Promotion Agency (CIPA) and Bloomberg that enables listing of Cyprus Funds on Bloomberg through its OpenFIGI platform. It may not be long before the government ultimately requires the registration and regulation of fund administrators like many other jurisdictions.
It is evident that with the continuous growth of the industry and the increasing regulations around that, technology will be a key element for success. If not, costs will grow as business expands and Cyprus will ultimately begin to lose out to those countries that have focused on automation and process standardisation that technology brings.
Melina Lori is a Consultant at Microgen Financial Systems and knows that while Excel spreadsheets may work on day one, they start going wrong from day two!