Cyprus Emerges as a Hub for Investment Funds, Managing €9 Billion in Just Ten Years

"Cyprus has gone from zero to over 330 licensed investment entities managing €9 billion in assets in just a decade," according to Maria Panayiotou, president of the Cyprus Investment Fund Association (CIFA). Speaking at the 5th Fund and Asset Management Conference in Athens, Panayiotou highlighted this growth as a result of "relentless effort and strategic vision."

Panayiotou detailed that Cyprus now hosts over 330 licensed entities, which include both collective investment management companies and schemes, with the majority of assets managed under Alternative Investment Fund Managers (AIFMs). She attributes this success to "systematic and hard work, in cooperation with the Supervisory Authority and all stakeholders."

Panayiotou emphasized that Cyprus has established itself as a key destination for Alternative Investment Funds (AIFs), attracting investors who are interested in high-risk, specialized investment opportunities. In contrast with UCITS (Undertakings for Collective Investment in Transferable Securities), which are designed for the public and focused on lower-risk securities, AIFs cater primarily to institutional and experienced investors seeking more diversified and potentially higher-yielding opportunities.

Globally, the investment fund market has reached €70 trillion by mid-2024, with Europe accounting for roughly 30% of this total, according to data from the European Funds and Asset Management Association (EFAMA). In Cyprus, the number of active collective investment institutions has grown from 166 in July 2021 to 257 currently, and Panayiotou expects this trend to continue as the country solidifies its reputation in the fund management sector.

She explained that Cyprus offers an advantageous environment for AIFs due to its strong legal and tax frameworks, strategic geographic location, and industry expertise. "Among the advantages are the strategic location, a strong legal and tax framework, and sector expertise, making Cyprus very attractive for international investors," Panayiotou said.

Presently, Cyprus ranks as Europe’s fourth-largest destination for cross-border investment funds, following Ireland and Luxembourg, showcasing its expanding appeal for fund managers and international investors. Besides these general benefits, Cyprus provides specific advantages for AIFs, such as flexibility in fund structuring and customization. Fund managers in Cyprus can establish either open-ended or closed-ended funds, manage a variety of asset classes, and set up umbrella structures to consolidate multiple funds under a single management entity.

Registered AIFs in Cyprus benefit from streamlined regulatory requirements, as they are exempt from licensure. The close ties between Cyprus and Greece further enhance Cyprus’ appeal, enabling funds based in Cyprus to invest internationally, including in Greece. Panayiotou emphasized that “Cyprus-based funds can invest in other countries, including Greece, leveraging Cyprus’s regulatory advantages,” adding that “this structure could be particularly attractive given the long-standing relationship between the two countries.”

While UCITS offer the public safer, lower-risk investments with greater liquidity, AIFs are aimed at institutional investors and knowledgeable individuals who are ready to assume higher risks. "AIFs usually target institutional and more experienced and well-informed investors, who are willing to take higher risk for their performance," Panayiotou explained. She added that UCITS provide "relatively lower risk and better investment protection."

AIFs also allow investors to access alternative assets, including real estate, renewable energy, and hedge funds, offering diversification beyond conventional equity and bond markets. “AIFs are suitable for investors seeking more specialised investments and have a higher risk tolerance, while UCITS are for investors who want safer options,” Panayiotou concluded.

By fLEXI tEAM