Mind the Gap: What the Deal Leaves Out for Business and Wealth Managers<\/h2>\n\n\n\n
Asset management and financial services are some of the most hard-hit areas of the UK and the EU\u2019s split. Beyond the scope of London\u2019s 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<\/a> discussing the need for preparedness in all areas affected by the UK\u2019s withdraw. <\/p>\n\n\n\n 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.<\/p>\n\n\n\n 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<\/a> that provides financial incentives and stable legislation for UK investment funds post-Brexit is a strategic opportunity.<\/p>\n\n\n\n \u200b\u200bIn general, European asset management regulations come from three main frameworks: the Alternative Investment Fund Managers Directive (AIFMD), the Markets in Financial Instruments Directive (MiFID) discussed above, and the Undertakings for Collective Investment in Transferable Securities Directive (UCITS). <\/p>\n\n\n\n Brexit compromises the UK\u2019s inclusion in the directives and might have the effect of rendering the jurisdiction as a third country under EU legislation. The impact would cause UK funds and management companies to lose the passporting rights into the EU but also in the other direction as EU-managed funds would no longer be able to enter the UK with passporting rights. <\/p>\n\n\n\n Given that the UK is the largest hub for asset management in the European continent, investment and access might be pulled from UK firms. In turn, AIFs are subject to each member state\u2019s national private placement regime (NPPR), which varies by jurisdiction. As a market strategy, this is not ideal for fund managers of investment funds post-Brexit, especially in jurisdictions that do not give permission for any NPPR.<\/p>\n\n\n\n The good news is that AIFMD covers all AIFs with recognition of EU and Non-EU AIF management companies, known as alternative investment fund managers (AIFMs). So while AIFMs lose passporting rights, they are still able to manage EU AIFs without trouble. Yet, any UK AIFs that are not EU marketed will be completely cut off from AIFMD.To avoid issues with systemic risks, investor protection, competition, and market fluctuations or disruptions, the best course of action would be to relocate to jurisdictions with strong financial service industries and proactive policies.<\/p>\n\n\n\n Cyprus has been garnering the attention of many international businesses<\/a> 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.<\/p>\n\n\n\n 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<\/a> by optimizing several areas of their portfolios.<\/p>\n\n\n\n Key factors making Cyprus an ideal location for investment funds post-Brexit include:<\/p>\n\n\n\n One of the biggest questions investment fund owners and managers have regarding selecting a jurisdiction is \u201cHow are investors taxed on stocks and mutual fund investments?\u201d Whether a jurisdiction provides a low or tax-free investment on mutual funds or other AIF structures presents a financial incentive to make the switch to an international location for fund owners as well as the managers that will represent their clients\u2019 investment funds post-Brexit. Under the Alternative Investment Funds Law of 2018, alternative investment funds (AIFs) can be structured as:<\/p>\n\n\n\n Registered Alternative Investment Funds (RAIFs) are registered AIFs in the jurisdiction under an authorized Fund Manager (AIFM), that is licensed anywhere globally under the EU passporting framework. This sets up a prime context for UK fund managers and their clients to set up operations in Cyprus while staying connected to the UK and the rest of Europe.<\/p>\n\n\n\n Moreover, Cyprus recognizes the establishment and registration of AIFs which may perform as an umbrella fund so that strategic investment opportunities may be considered for a collection of smaller funds.The Alternative Investment Fund Management Law (2013) grants AIFMs the authorization to market and provide services as long as they are EU-authorized and manage assets worth over \u20ac100 million. For managements with fewer assets than that, Cyprus oversees and regulates them as mini-managers with policies on capital requirements. <\/p>\n\n\n\n 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<\/a> have helped shape the real estate, shipping, hospitality, education, healthcare, energy, and film industries.<\/p>\n\n\n\n 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%<\/a> and the World Bank Doing Business Report lists Cyprus as 54th<\/sup> in Ease of Doing Business<\/a> in 2020. <\/p>\n\n\n\n As foreign investments and favorable regulatory policies propel Cyprus forward, global competitiveness becomes Cyprus\u2019s advantage<\/a>. For 2019, the country ranked 44th<\/sup> out 141 countries on the World Economic Forum\u2019s Global Competitiveness Report<\/a>, 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.<\/p>\n\n\n\n According to CySEC, as of September 2020<\/a>, 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.<\/p>\n\n\n\n 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<\/a>.<\/p>\n\n\n\n Other indicators<\/a> 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.<\/p>\n\n\n\n In 2020, CySEC was providing oversight for nearly 800 international entities<\/a> and had registered a workforce three times as large as the previous decade in order to maintain high-level regulatory service. While the financial sector has always been a strong component of the Cypriot economy, the pandemic and international events such as Brexit have catapulted the country into a greater role of entrepreneurship and opportunity, especially in regards to financial technology and investment funds. Put into perspective, more than 250 fintech firms have established a presence in Cyprus and provide regulatory and compliance services, industry-specific technology, artificial intelligence capabilities, and investment into blockchain.<\/p>\n\n\n\n Further, Cyprus has roughly 30 blockchain start-ups with fund investment of \u20ac142 million, maintaining a competitive edge with other European financial hubs. Among the array of fintech companies, crypto-trading and exchanging as well as alternative payment options have emerged on the scene.<\/p>\n\n\n\n To support the financial services ecosystem, cities such as Limassol have rapidly developed as financial service markets, with the city of Limassol meeting the demand with more than 8,000 ICT experts. Both private and public support systems have been established to garner innovative solutions and healthier relationships among entrepreneurs, academics, and research institutions.<\/p>\n\n\n\n The European Fund and Asset Management Association has carefully observed the exponential growth of the investment fund industry of Cyprus. Against other European locales, the fund industry in Cyprus achieved the highest growth in net asset value in Q4 (2019). Within the decade, management of assets has expanded to cover \u20ac8 billion. Should the current rate of growth remain consistent, the next five years would add \u20ac4 to that total.<\/p>\n\n\n\n One of the reasons the island has generated so much attention for the management of investment funds post-Brexit is the associated low cost of maintaining a company in the jurisdiction. Andreas Yiasemides, President of the Investment Funds Association, explains that investment fund management companies see costs two-thirds lower than other European investment fund hubs<\/a> such as Luxembourg or Ireland. The result is the same standard of high-quality services and policies at much lower labor costs and key tax incentives.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n There is no better time than to move investment funds post-Brexit to Cyprus and the professionals at The Aspen Trust Group<\/a> are dedicated to providing services with the highest in quality and most affordable in cost<\/a> 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<\/a> to learn more about the Cyprus advantage for your unique fund needs and succeed in growing your investment funds post-Brexit.<\/p>\n","protected":false},"excerpt":{"rendered":" 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, …<\/p>\n![\"\"](\"https:\/\/aspentrust.com\/wp-content\/uploads\/2021\/03\/investment-funds-post-brexit-2.jpeg\")
<\/figure>\n\n\n\nUK and EU-Fund Managers Should Both Be Concerned <\/h2>\n\n\n\n
Beyond Filling the Gap: Operating Investment Funds Post-Brexit in Cyprus<\/h2>\n\n\n\n
![\"Brexit](\"https:\/\/aspentrust.com\/wp-content\/uploads\/2021\/03\/investment-funds-post-brexit.jpeg\")
<\/figure>\n\n\n\nTax on Investment Funds in Cyprus<\/h2>\n\n\n\n
Cyprus continues to offer investors and financial managers a range of benefits for tax on investment funds, including:<\/p>\n\n\n\nTypes of Investment Funds and Management Solutions in Cyprus<\/h2>\n\n\n\n
Market Opportunities and Other Key Benefits<\/h2>\n\n\n\n
![\"Brexit\"](\"https:\/\/aspentrust.com\/wp-content\/uploads\/2021\/03\/investment-funds-post-brexit-3.jpeg\")
<\/figure>\n\n\n\nCyprus as a Growth Leader in the EU\u2019s Fund Industry<\/h2>\n\n\n\n
Financial Services Sets Its Sights on Cyprus<\/h2>\n\n\n\n