Gold Magazine March - April 2013, Issue 24 | Página 30

OPINION

The Time is Right for
the Fund Industry
Growth in the financial sector may
be based on this promising key area

T

he financial sector in Cyprus is
definitely in the spotlight these
days, though not only for the
right reasons as any positive
events are inevitably overshadowed by the banking crisis. The
evolution of the sector however, may well be based
on a promising key area: the fund industry.
If anything positive may be taken from the postLehman and sovereign debt crises, it is the revelation
of the opportunities offered to the local financial
sector and particularly the fund industry. Amidst all
the turmoil, it has gone relatively unnoticed that the
Cyprus Securities and Exchange Commission has
successfully integrated all the important European
directives linked to the fund management industry
and its managers while other mature fund centres are
still boasting their expertise on technicalities. Or that
it has authorized Beneficentia Ltd, the first UCITS
fund management company, with the first Cyprus
domiciled UCITS funds being imminent. The new
fiduciary law is another evolutionary step impacting
the fund services sector that brings Cyprus a little
bit closer to the models of Malta or Luxembourg
which are the inspiration behind the newly-created
Cyprus Investment Fund Association. This year,
the revamped International Collective Investment
Scheme Law will come to complete the regulatory
picture of a promising fund centre.
With 94 ICIS Funds as of November 2012 and
a possibly good number of applications pending, it
is undeniable that the Cyprus fund sector and the
related financial services industry are growing. However, now that UCITS funds will also be domiciled
and serviced locally, accountancy firms may find it
difficult to source enough fund experts locally, thus
resorting to global recruitment networks for expertise and experience.
The fund industry is seeing growth in alternative
funds, including hedge funds, private equity funds
and real estate funds. The challenge that local service
providers are likely to face is that the alternative fund
sector is highly sophisticated in areas ranging from
valuations, securities services or fund-related tax
implications. For the Cyprus fund industry, training may therefore well become a priority. To match
current needs and prepare for continuous growth,

Cyprus has
every chance
of becoming
another solid EU
fund jurisdiction

By Ioannis
Gaiganis

firms will need to grow or bring in experts, training
staff and prepare for an increasingly complex and
expanding fund sector. Cyprus has no shortfall of
talent but lacks the infrastructure to build the expertise and grow the experience.
Unless local training firepower is developed to
address this challenge, other jurisdictions are likely
to start grooming people to become Cyprus fund
experts. We may therefore see mobility coming into
the industry and while it is certainly healthy to become more multi-cultural, local expertise in sectors
like accounting or tax must also be maximized to
address the needs of this industry.
2013 is likely to be a continuation of 2012 in
that fund industry momentum will continue to
accelerate. ICIS (International Collective Investment
Scheme) enquiries may continue to dominate the
market place but with UCITS IV already in force in
Cyprus, the regulator is about to authorise locallydomiciled UCITS vehicles which, while capitalising
on their UCITS status, are doing so by boasting the
benefits of a quality service environment at a much
more competitive cost.
In the meantime, the immediate growth is coming from the non-UCITS funds (ICIS) rather than
UCITS and while this may continue in 2013 both
types will continue to increase in numbers. The
introduction of the alternative investment fund
managers directive (AIFMD), despite its regulatory
burden, may still offer more flexibility to alternative
funds than through UCITS. As a result, Cyprus may
continue to attract a lot of start-up funds and related
businesses with innovative structures and products.
Cyprus may start by being a small player in the
fund sector but it can dramatically increase its
market share as it exploits existing business links
with regions and countries that are still untapped by
other mature fund centres and with which it enjoys
unique longstanding relationships.
Further expansion of the fund sector seems unavoidable, considering the island’s tradition of offering
corporate services and its ideal positioning as an EU
financial services centre close to key regions in need
of EU fund solutions. If local expertise increases at
a rate that supports and accelerates growth, Cyprus
has every chance of becoming another solid EU
fund jurisdiction.

info: Ioannis Gaiganis is a fund management industry expert, a founder member of the Expert Fund Committee of the Cyprus Investment Promotion Agency (CIPA)

and a member of the Alternative Investment Fund Managers Directive (AIFMD) Committee at the Ministry of Finance, Cyprus.
30 Gold THE INTERNATIONAL INVESTMENT, FINANCE & PROFESSIONAL SERVICES MAGAZINE OF CYPRUS

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07/03/2013 11:50