Cyprus presents a viable alternative to other EU domiciles at a much lower cost and is successful in attracting small and medium-sized funds avoiding the high costs of other fund jurisdictions, both in terms of initial setup and ongoing operating expenses.
Can you give us a brief introduction to Alter Domus in Cyprus and the services you offer?
Alter Domus has been present in Cyprus for more than 10 years. Our local team of knowledgeable staff members leverage the same technical software platforms used by Alter Domus globally across 36 offices in 21 countries. Alter Domus Cyprus can assist fund and asset managers with the setup of Cyprus alternative investment funds (AIFs) and Cyprus companies. We also undertake the ongoing fund and corporate administration, including NAV determination and bookkeeping, transfer agency services, investor communication and regulatory communication, and submissions required with the local authorities and regulators such as the Income Tax Office, Central Bank and Registrar of Companies.
Offering a full range of middle and back-office services, we work closely with fund managers from the initial stages of determining the most suitable fund structure (umbrella fund or other) and type of fund (AIF internally/externally managed or RAIF), in order to ensure smooth operation of the fund. In case the fund requires a European fund manager, Alter Domus provides third-party AIFM services in Luxemburg and Ireland that are fully compliant with the AIFMD and thus allow them access to European passporting.
What is the general profile of the funds that you service from Cyprus? Do you also service funds established outside Cyprus?
Alter Domus is dedicated to servicing funds with alternative strategies. We offer fund administration, corporate services and domiciliation services to private equity, real assets (including real estate and infrastructure), shipping, and debt capital markets clients.
Alter Domus serves 16 of the 20 largest private equity houses, 17 of the 20 largest real estate firms, and 17 of the 20 largest private debt managers in the world and has more than US$1.3 trillion in global assets under administration.
When a client already has a fund setup in countries other than Cyprus, such as Luxemburg or the US, our global presence with offices in all key fund jurisdictions allows us to undertake the administration of the fund as well as the administration of the fund companies (SPVs) in the countries where we have offices. This way, the client’s structure is managed by a single service provider globally, achieving synergies and efficiencies by using the same quality standards, software and procedures.
Cyprus is one of the most flexible and cost-effective jurisdictions in the EU. What gives Cyprus an edge over other fund centres in this respect?
In Cyprus, one can achieve the same benefits as in other EU fund jurisdictions but at a lower cost. The country’s legal framework, which is based on Common Law, is the most flexible in the EU and maintains a high level of investor protection. The combination of Cyprus’ modern regulatory framework, which is in line with other EU fund jurisdictions, the cost-efficient maintenance of a Cyprus structure, attractive tax regime, growing client demand, and the fact that Cyprus funds are listed on key international platforms such as Clearstream and Bloomberg, gives Cyprus an edge over other EU fund centres.
Cyprus is working on the introduction of a new fund administration law. What can you tell us about the current supervision of fund administrators on the island and what insights can you share about the new law?
The Cyprus Securities and Exchange Commission released a consultation paper for a proposed law on investment fund administrators. This is indeed a very positive development, given that it will provide a framework which will regulate fund administrators and, as a result, provide assurances to members of the investment industry including fund managers and investors on the level of quality of the fund administrator’s services as well as the administrator’s operations in general.
Alter Domus is one of a few truly global service providers that are active in Cyprus. Why do you believe the island has yet to come onto the radar of other larger players in the sector, including banks and custody providers? What could be done to enhance Cyprus’ profile as an investment funds jurisdiction further?
International banks and custody providers are the last piece of the puzzle which is needed to support the preferences and demands of well-informed professional and institutional investors and larger fund managers. Certain steps needed to be completed in order to be in a position to attract such players in the local industry. These include the update of the local legislation which has been updated to be the most attractive in the EU and will be even more so following the forthcoming law surrounding the regulation of fund administrators. Given the state of things currently, it is expected that the arrival of such companies in Cyprus is imminent.
What are the key challenges of operating in Cyprus that you are facing and what are the greatest growth opportunities that you have identified?
Cyprus is the new kid on the block in the industry of investment funds and, as such, it faces both challenges and opportunities. We are better placed to avoid mistakes – which other countries that were first in this space had to resolve – and differentiate our offering in order to make it more competitive and attractive. We have all the elements necessary to become a successful fund jurisdiction, including legislation, a high-calibre workforce and the right tax system with very attractive tax benefits.
What key advice would you like to give anyone seeking to outsource the administration of a fund?
Powerful institutional and individual investors require customised reporting, 24/7 access to account information, and expedient service. Investors are allocating more assets to private markets and in return for their investments, they require more information and better service. Consequently, they are looking for more resilient and specialised support. At the same time, regulators, including the regulator in Cyprus, are increasing their demands on asset managers.
A properly equipped fund administrator is able to support with the right tools and infrastructure. Such tools are used by Alter Domus. As an example, we use eFront for NAV calculations and Yardi for real estate funds. As part of a global entity, we have the benefit of using the same sophisticated IT platforms which are also used in all Alter Domus locations globally.
What are Alter Domus’ growth plans and investment priorities for the coming years?
In the years ahead, Alter Domus will double down on its key to success: our people and technology. Our growth strategy is focused on providing high-quality, tech-enabled, vertically integrated solutions to the most demanding private equity, venture capital, real estate, and credit investors. By building proprietary technology platforms that work alongside existing industry platforms, we ensure our clients and teams are equipped with the tools and information they need.
How do you expect the investment fund sector to develop in Cyprus over the next two to three years?
Cyprus has been growing rapidly as a jurisdiction in the investment fund sector, offering flexibility to fund managers in terms of both structure and taxation – as well as the credibility of an EU-regulated regime. Cyprus presents a viable alternative to other EU domiciles at a much lower cost and is successful in attracting small and medium-sized funds avoiding the high costs of other fund jurisdictions, both in terms of initial setup and ongoing operating expenses. Cyprus is moving in the right direction to become more visible to global managers and solidify the country’s position as a recognised investment fund jurisdiction.