Focus on smaller end of market
Instead of trying to compete with the offerings of other mature jurisdictions like Luxembourg and Ireland and targeting the international big players, Cyprus is focused on its niche market offering, targeted at family offices and smaller asset managers.
Yiasemides says Cyprus’s cost-efficient structure is well suited to small to medium fund managers: “Obviously, we cannot compete with Luxembourg and Ireland for the time being. However, we believe that especially for small to medium fund managers which need to be cost cautious, Cyprus is an ideal destination, and 65% of fund managers belong to this category.”
Having a cost-efficient structure does not mean compromising on the quality of financial services. “On the contrary,” he adds, “Cyprus has been a centre of excellence for so many years regarding financial services. But the fact that labour costs, rental prices and other costs are much lower in Cyprus compared to Luxembourg and Ireland allows us to provide professional and high-quality services to fund managers at competitive fees and prices.”
Koukounis agrees that this is what gives Cyprus an edge over other jurisdictions. “We have high standards of education and professional experience, but offer our services at a fraction of, or very significantly lower than, our colleagues in Luxembourg, Ireland, the Cayman Islands and Malta. An asset manager of €0.5 billion or even less under management can start a venture and be able to offer attractive returns without being concerned about what will remain after all the expenses of running a fund or fund management service.”
However, while a low-cost domicile is clearly attractive, there are many other factors that prospective firms will be looking for.
Borisov says Cyprus needs to focus on making it easier and faster to set up shop: “It can compete on cost, obviously, but is probably not that good at competing at speed, I would say this is an area for improvement – speed of registration, licensing, etc. So, it probably should and is already doing more to attract money from jurisdictions such as Eastern Europe, the Middle East and India.”
Being part of the EU is another obvious attraction, but many also point out that Cyprus’s common law system makes it easy to do business on the island. Yiasemides says this could be attractive to the UK market following Brexit, given that common law jurisdictions are very important for the British funds sector.
It is evident that Cyprus is taking leaps forward, bearing in mind the sheer number and types of investors and investments it has attracted in the past few years.
Evagorou is optimistic about the domicile’s future as a fund destination, considering the huge efforts being made. She says: “I am sure we will continue to attract more flows because we are introducing all the right parameters to create the appropriate platform to grow even further in the future.
“The main focus right now should remain on building a strong industry, a modern and flexible framework which will allow us to keep being competitive and to develop the entire ecosystem to be able to support the more mature and complex structures that keep coming to Cyprus.”
It is evident, says Vasiliou, that Cyprus is not trying to compete with other jurisdictions such as Luxembourg and Ireland. “Cyprus has more to offer to small/medium-size fund managers who are looking to expand their operations throughout Europe in a cost-effective manner. The ecosystem in Cyprus has come a long way over the past years, converging EU legislation with national legislation to create the right conditions for fund managers to operate whilst having investor protection as a priority.”
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