While the United Kingdom continues to figure out how to deal with the impacts of its decision to leave the EU, many investors and wealth managers in the fund industry are navigating the impacts of being left out of the Deal. The option now for many investment funds post-Brexit is to find international solutions. Cyprus, with modernized legislation and a host of economic benefits for foreign investors, is a strong choice for taking advantage of the legal and financial gaps currently facing investment funds post-Brexit.
The Aspen Trust Group explores the unique cross-border opportunities for UK firms in selecting Cyprus as the next step up for investment funds post-Brexit.
Mind the Gap: What the Deal Leaves Out for Business and Wealth Managers
Asset management and financial services are some of the most hard-hit areas of the UK and the EU’s split. Beyond the scope of London’s future as a financial center, questions over the next stages of legislation and their implications for firms cause uncertainty about the maintenance of operations and growth for investment management and access to global financial services. In 2018, the European Commission publicly addressed these concerns in a Communication discussing the need for preparedness in all areas affected by the UK’s withdraw.
The issue centers largely on the conduction of business through an EU regulatory passport, namely the MiFID, which oversees regulations on the distribution of asset and fund management services. Without the MiFID, equivalence becomes the standard for determining business activity, a process that requires judgment for each piece of legislation and could face challenges with individual member states.
Moreover, many UK firms cannot afford to wait for the possibility that the UK and the EU will come to a decision to continue all business activities uniformly. Relocation to a jurisdiction that provides financial incentives and stable legislation for UK investment funds post-Brexit is a strategic opportunity.
Beyond Filling the Gap: Operating Investment Funds Post-Brexit in Cyprus
Cyprus has been garnering the attention of many international businesses for its excellent regulatory framework, cost-optimizing tax regime, and the quality of its growing financial services sector. The pro-business environment of the jurisdiction can also be beneficial for the portfolio management and asset management of investment management companies and foreign investors alike.
At a time where the future of investment funds post-Brexit leaves many UK firms questioning how to maintain operations and growth, Cyprus provides not only a stable foundation to continue normal operations but also an opportunity to strategically invest in the future of their assets by optimizing several areas of their portfolios.
Key factors making Cyprus an ideal location for investment funds post-Brexit include:
- Access to EU Passporting and Network of International Non-Member States: Investment funds post-Brexit will still be able to enjoy business connection and operation to EU member states as well as third countries such as Switzerland, the US, India, Israel, and Singapore.
- Modern, Efficient Legal and Regulatory Framework for Better Business: Based closely on the English common law legal system, Cyprus policy offers strong protections and efficient regulatory practices that maintain transparency and compliance with the EU and international standards.
- Connection to A Pool of Highly-Skilled Professional Talent: Cyprus is a fast-growing financial hub with a multilingual, business-minded workforce focused on the service industry and also provides a network to top international talent across several world regions.
- Affordable professional fees and thriving financial service industry: Among EU member states, Cyprus has some of the lowest labor costs in comparison to high quality services. Office rental rates are also among the lowest in Europe, saving UK firms operational costs in the long-term and avoid complex bureaucracy.
- Entry in Strategic Market Location: Situated between three major continents, Cyprus brings together a blend of global market access, including Russian and Chinese partnerships, while providing more than 40 EU Trade Agreements and 65 double tax treaties.
- Advantage in Structure Flexibility: From alternative investment funds (AIFs) to registered alternative investment funds (RAIFs), Cyprus offers flexible structures, inclusive of any asset, when choosing between registered and alternative investment fund managers to get foreign investors and firms the most from their portfolio management.
- Upgrades in Tax-Friendly Regime: Investment funds post-Brexit and their associated fund managers can benefit from the attractive tax policies of Cyprus, with more than six advantages in lower or no taxation.
Market Opportunities and Other Key Benefits
Another reason to consider Cyprus for the relocation of investment funds post-Brexit is the ability to join an active investing community that has worked to grow many industries in the country. Foreign investors have helped shape the real estate, shipping, hospitality, education, healthcare, energy, and film industries.
Investments in these fields continue to drive the economy of Cyprus towards being an advanced, fast-growth leader in the EU. GDP growth in the third quarter of 2019 was 3.4% and the World Bank Doing Business Report lists Cyprus as 54th in Ease of Doing Business in 2020.
As foreign investments and favorable regulatory policies propel Cyprus forward, global competitiveness becomes Cyprus’s advantage. For 2019, the country ranked 44th out 141 countries on the World Economic Forum’s Global Competitiveness Report, indicating strong international confidence in the future business outlook of the country and one of the best jurisdictions to safeguard valuable investment funds post-Brexit.
Cyprus as a Growth Leader in the EU’s Fund Industry
According to CySEC, as of September 2020, Cyprus had a total of 8 billion Euros in assets under management (AuMs) which accounted for a 5.3% increase from the previous quarter. Private equity and real estate made up most of these investment funds.
Asset holders and investment managers can capitalize on the opportunity for investment funds post-Brexit by turning to Cyprus. Already many UK firms and investors have chosen Cyprus as not only a positive locale for investment due to Brexit but also as a growth leader in general. Q4 of 2019 demonstrated the largest percentage increase in net assets among the European Investment Fund industry with a rise of 11.9% according to EFAMA Quarterly Statistical Release.
Other indicators of strong growth for Cyprus as an investment fund hub were the 10.5% increase in net AIF assets of the European AIF industry and 37.8% in net UCITS assets of the European UCITS industry in the same 2019 Q4 period.
Investment funds post-Brexit can find promise in the thriving economic environment of Cyprus. The maintaining of cross-border operations, management, and financial services is only one component of investment success. While these areas may be the most prominent priorities for the portfolio management of UK firms, investment funds can use Cyprus to optimize and get ahead in many other areas as well.
There is no better time than to move investment funds post-Brexit to Cyprus and the professionals at The Aspen Trust Group are dedicated to providing services with the highest in quality and most affordable in cost to help you not only manage your assets but also to expand your wealth assets to meet your financial goals. Contact our team of financial experts to learn more about the Cyprus advantage for your unique fund needs and succeed in growing your investment funds post-Brexit.