1. The Investment funds balance sheet data: assets table

The total assets outstanding at the end of September 2020, were reported at 5,602.7 million EUR. This is a 2.7% decrease following the previous report on total assets, which reported a rebound in June 2020 after the first quarterly decrease (at -8.7%) in over 2 years for the period ending in March 2020. The drop in the reported total assets should be considered in terms of importance along with the overall investment climate. We believe on its own it is both a small decrease and we will need the next 2 quarters to draw conclusions. At 5.6 billion EUR this is the 4^th highest all time Assets Under Management (AUM) for the Cypriot jurisdiction and a mere 400 million from the 6 billion EUR AUM reported at the end of December 2019. It will be interesting to see by how much and when that record will be surpassed.

The data on the number of reporting entities recorded yet another increase – the 12^th consecutive quarter-over-quarter increase – cementing the industry-wide view of a rightly accepted upward trend of growth for investment funds in Cyprus. This growth trend has resulted in 208 entities at the end of September 2020 from 199 at the end of June 2020 – an increase of 4.5%. The net 9 additional entities came about as a result of the registration of 17 RAIF (Registered Alternative Investment Funds) – a record quarterly high and a vote of confidence in the investment vehicle.

Figure 1 below, combines these 2 data sets with

• the y-axis on the left and the bars along the x-axis showing the Total Assets in EUR million, outstanding,
• the y-axis on the right and the line along the x-axis showing the Number of Reporting Entities,

at the end of each period.

Figure 1 – The progress of Total Assets in EUR million (bars), outstanding at end of period and the Number of Reporting Entities (line) since end of December 2010 until end of June 2020.

2. The Investment funds balance sheet data: liabilities table

The breakdown of the liabilities on the balance sheet of Investment Funds in Cyprus is reported in 3 categories by the CBC:

1. Loans
2. IF (Investment Funds) shares/units
3. Other liabilities (incl. financial derivatives)

Most liabilities are consistently coming from IF shares/units with 4,854.4 EUR million outstanding at the end of September 2020 amounting to 86.6% of the total liabilities of Investment Funds in Cyprus. Loans follow with a reduced quarter-over-quarter 595.8 EUR million outstanding (10.6%) and finally, other liabilities (incl. financial derivatives) amount to 152.4 EUR million outstanding (2.7%).

3. The Investment funds total assets/liabilities, by nature of investment table

The breakdown by nature of investment of the assets/liabilities on the balance sheet of Investment Funds in Cyprus is collected in 5 categories (Figure 2) by the CBC:

1. Equity
2. Bond
3. Mixed
4. Real Estate
5. Other

Compared to the end of the previous period in June 2020, Real Estate and Mixed recorded an increase while the categories of Equity, Bond and Other decreased. This has maintained Real Estate (blue line in Fig.2) as the 3^rd biggest category ahead of the Mixed (purple line in Fig.2) category. The Real Estate category grew by more than 10% quarter-over-quarter and is approaching the 700 million EUR barrier for the first time. Equity remains in 2^nd place behind Other. The second biggest asset class, Equity (red line in Fig.2), reported a decrease in outstanding amount terms, of 122 EUR million. The total outstanding, for Other (orange line in Fig.2) asset class, at 2,129.9 EUR million, is the 3^rd highest of all time for the category.

Figure 2 – The progress of total assets/liabilities in EUR million (bars), outstanding at end of period broken down by the nature of the investment.

4. The Investment funds total assets/liabilities, by type of investment fund table

The type of investment funds is split into Open End and Closed End.
As shown in Figure 3, the consistent theme of decreasing Closed End Investment Funds total assets/liabilities continued at a slower pace and a new all-time low was recorded at 258.7 million EUR (green line in Fig. 3), while the decrease in Open End (red line in Fig.3) was -109 million EUR bringing the total for the category at 5,343.9 EUR million.

Figure 3 – The progress of the total assets/liabilities in EUR million (bars), outstanding at end of period broken down by type of investment fund.

5. The Investment funds total assets/liabilities, UCITS/Non-UCITS breakdown table

The final table of the Investment Funds Statistics as reported by CBC shows total assets/liabilities for both, UCITS and Non-UCITS investment funds. As reported in our previous commentary on the investment funds in Cyprus, at the end of March 2020, total assets/liabilities for UCITS amounted to 321.6 EUR million outstanding while for Non-UCITS, the total assets/liabilities were reported at 5,242.3 EUR million outstanding. In the previous period to this one, at the end of June 2020, these had increased to 366.2 million EUR and 5,394.4 million EUR for UCITS and Non-UCITS respectively. The current report which includes data up to the end of September 2020, has UCITS and Non-UCITS at 365.4 million EUR and 5,237.3 million EUR respectively.

Conclusion

In as few words as possible, nothing is constant, the challenge is there and can be overcome, and the stakeholders are working hard to cement Cyprus as an investment funds jurisdiction. After the very strong 2019 and a mixed 2020 in terms of total assets, the continuously increasing number of reporting entities is a testament to the tenacity of the Investment Funds industry in Cyprus.

The continued complications and impacts arising from the Covid-19 pandemic, a crisis has interrupted economic activity like no other event, is forcing disruptive developments across many different business verticals. There has been recovery in the financial markets, and while there are still many unknowns, this quarter’s data and the work of key stakeholders such as CySEC and CIFA, the Funds service providers and SALVUS, are obvious pillars for the growing  AUM in this jurisdiction. The presence of entities of the magnitude and credibility of MUFG, Aviva, Calastone and Bloomberg in the 2020 6^th Cyprus Funds Summit is both a responsibility and an opportunity to work harder towards a more complete Investment Funds ecosystem in Cyprus.

As always, we welcome creative thinking and an optimistic attitude in facing this crisis as an opportunity. Part of our public #StayAhead commitment is exactly about that. We remain committed to contributing further and aiding in this recovery and our clients and partners growth.

Do not hesitate to contact us if you require further information. We will be glad to support you in finding an appropriate solution or answering your questions.

#StayAhead.

Should you be interested to read about relevant topics on the funds sector, feel free to visit our earlier articles:

• AIFMs, UCITs and the Liquidity stress Tests (LST)
• Is it all gloom and doom for hedge funds returns (YTD)?
• The Reasons AIFM, AIF and RAIF come to Cyprus
• The Cypriot AIF: legal forms, types and requirements
• The Cypriot RAIF: substance, requirements and tax
• Cyprus Investment Funds Statistics – August, 2020
• Cyprus Investment Funds Statistics – May, 2020
• Cyprus Investment Funds Statistics – February, 2020
• Nikolas Xenofontos shares ESMA’s LST guidelines in CIFA newsletter

The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.