Regulatory hurdles remain one of the greatest challenges for asset managers who increasingly look to outsource compliance functions. We spoke with Constantinos Meivatzis, Managing Director of IQ-EQ Cyprus, who says the firm combines industry expertise with innovative regtech solutions to deliver cutting-edge services to fund professionals and investors alike.
Outsourcing is booming in the investment funds industry. What makes IQ-EQ distinct and why should the company be on the radar of finance firms and investors?
IQ-EQ is a leading investor services group providing a comprehensive range of compliance, administration, asset and advisory services to fund managers, multinational companies, family offices and private clients globally.
Our experienced fund administration professionals provide end-to-end services to both open and closed-ended fund structures, combining their technical understanding of funds with a proven track record in private equity, venture capital, real estate, hedge, infrastructure, debt and credit fund administration across multiple jurisdictions.
In our London and Luxembourg offices, we also operate as an independent third party AIFM and provide a range of AIFMD-related risk and regulatory compliance solutions to investment managers, including depositary services. In addition, we offer a number of proprietary technology platforms such as IQ-EQ Cosmos (investor reporting and portfolio monitoring) and MaxComply (AML/KYC compliance), as well as IQ-EQ Compass, a new integrated service offering that simplifies ESG compliance and risk mitigation.
Providing such a complete service requires scale and a deep well of knowledge, which is why we have offices in 15 key fund centres across four continents and our senior relationship managers each have a minimum of 20 years’ industry experience. We have the skills and the tools to support you throughout a fund’s lifecycle, from launch through to investment realisation and at any stage in between.
Today’s fund managers have to ensure they are compliant with a multitude of regulations. What have you identified as the greatest challenges for funds and fund professionals in the field of compliance and how do you help them to meet their reporting obligations?
There are increasing fund and fund manager compliance requirements thanks to far-reaching regulations such as Common Reporting Standard (CRS) and the US Foreign Account Tax Compliance Act (FATCA), adding to the complexities of doing business. As a fund manager, it can be hard to keep up with the evolving global standards of investment fund regulation, as well as compliance obligations including GDPR, KYC and reporting deadlines.
Through our range of fund manager compliance services, we help ease the burden and ensure our clients meet their various regulatory compliance obligations. We understand the issues from a practical point of view; our team has in-depth expertise in fund regulation, investment and hedge fund compliance, money market fund regulation and more, having worked for regulators as well as client firms.
We combine our industry expertise with innovative RegTech solutions to deliver a suite of services including regulatory authorisation, ongoing compliance monitoring and tax compliance with FATCA and CRS.
Our MaxComply software platform allows businesses to better manage their operations and controls surrounding AML/KYC processes and verification of external entities. Via highly customisable dashboards, users can cleanly set out and configure task workflows, review submissions in real time and polish the entity on-boarding experience.
What can you tell us about the connection between wealth management and family offices and Cyprus’ investment funds offering?
The needs of UHNWIs have considerably evolved over the past decade and they have ‘institutionalised’ through the setting up of professional family offices. The modern world is a complex place and increased globalisation of families and their wealth brings them into contact with higher levels of regulation and more legal regimes, giving rise to issues such as asset ownership, succession rights and taxation.
Increasing numbers of family members in this wealth tier end up living abroad, educating themselves abroad, and even settling abroad away from the family’s origin country, creating a far greater geographical footprint. All of this makes managing family wealth – particularly across multiple generations – extremely difficult without the stewardship that a family office provides.
As more and more family offices are established in Cyprus, interest in Cyprus funds increases. Through the use of funds, family offices can invest directly into private assets like family businesses, private equity, venture capital and real estate. IQ-EQ can provide access to private funds in a number of jurisdictions for investing within families, between families, or between different branches of families across the world.
ESG funds are quickly moving into the mainstream. How is Cyprus responding to this trend?
Once on the periphery, environmental, social and governance (ESG) driven investing is now an enticing way to future-proof portfolios. The Covid-19 pandemic – with its sustainability shock and collective rethink about how we should act as global citizens – has further accelerated its popularity. For example, carbon-intensive sectors have been downgraded, while green and sustainable opportunities are having their moment. It’s unsurprising that 2020 marked the first year in which investment in ESG funds topped US$1 trillion.
Combining our favourable regulatory framework, well-educated workforce and transparent tax environment, ESG funds established in Cyprus have a lot to gain. As Cyprus is a relatively young jurisdiction for funds and fund managers, there is an opportunity to start right and capitalise on the ESG mindset that younger generations have. With the expected transfer of wealth from older generations to their children and the ESG switch that this will bring, the Cyprus fund industry has a great opportunity to be a pioneer in ESG-compliant investing.
Could you kindly explain what role technology plays in service provision today and tell us what fintech and regtech solutions you have implemented?
In today’s world, technology plays a unique role in the provision of services and this is particularly pertinent in the fund industry. At IQ-EQ, we use industry-leading fund administration and accounting software such as eFront, FIS Investran, PFS Paxus and Allvue. We have developed our own technology solutions such as MaxComply, our regtech system, and IQ-EQ Cosmos, which captures real-time data and turns it into intelligent reporting to assess different asset classes, portfolios, funds and investments. Data is secure with us, as we have security systems and processes to protect your information and are ISAE 3402 accredited.
Cyprus is in the process of drafting a fund administration law. What comments would you like to make about this development?
We are very much in favour of the fund administration law as we believe it will contribute towards the improvement of the services offered, narrowing down to those providers who have the knowledge and technology to provide sufficient service quality, thus bringing our fund industry on a par with competing jurisdictions globally.
It is often said that Cyprus is one of the most flexible and cost-effective jurisdictions in the EU. What in your opinion gives Cyprus the edge over other fund centres in this respect?
Cyprus is at the stage of changing its business model and switching from the servicing of plain vanilla set-ups to more sophisticated structures. In addition to the obvious advantages that we have as a jurisdiction, I would place access to, and availability of, highly qualified and innovative human capital as key to Cyprus’ offering. The young generation of Cypriot professionals is not only well educated, but they bring back to Cyprus experiences from studying and working with global institutions abroad. The human capital aspect, coupled with the ‘hindsight’ that we have as a result of coming into the fund industry later than other jurisdictions, are in my view the most important advantages of our jurisdiction.
How do you anticipate Cyprus’ asset management sector will develop in the coming two to three years?
Cyprus needs a solid banking industry in order to further develop its asset management sector. We already see some very good signs of this, but I believe that more needs to be done in this respect. Once this aspect has been fully addressed, it is my view that the Cyprus asset management sector will develop significantly in the years to come, especially with the increase in family offices that we see being set up on the island.
What are IQ-EQ plans and priorities in Cyprus for 2021 and 2022?
The IQ-EQ group has been operating in Cyprus for more than 20 years. Being established as a reputable international service provider doesn’t come on its own, and therefore our focus for the years to come is to continue offering the best quality of service to our clients.
In terms of expansion, our plan is to continue to grow organically by attracting new clients, offering new services to our existing clients and using our international presence to service client needs globally. Of primary importance to us is to form new strategic alliances with reputable firms in Cyprus whose services are complementary to ours, building upon our and their competitive advantages. Last but not least, we do not exclude inorganic growth via carefully selected business acquisitions in Cyprus, provided that such acquisitions fit our culture, modus operandi and global strategy.