Dear Chairman and Members of the Board of Directors,
Ladies and Gentlemen,
I would like to thank you warmly for your invitation to the Annual General Meeting of the Cyprus Investment Funds Association (CIFA). An Association that was established in 2013, shortly after the crisis, and has evolved into a key enabler of growth, very important for the economy and especially in the investment funds sector.
Particularly for a small country like Cyprus, the healthy development of the sector is vital. It is the necessary alternative source of financing for investments, projects and the economy beyond the traditional bank financing model. The alternative business financing that the economy needs to move forward, especially considering the relatively high private debt of households and businesses.
The proper functioning of the investment fund sector, with appropriate safeguards, is beneficial for investors, their providers and the economy in general.
The importance of this sector for the financing of the economy can be seen from the interest that the European Union has shown in recent years through the creation of the Capital Markets Union and in particular through the adoption of legislation on the whole range of participants in the sector, such as Alternative Investment Fund Managers, venture capital funds, known as venture capital funds, and European Long Term Investment Funds (ELTIFS).
It is our belief that the investment fund sector in Cyprus can be an important area of alternative financing for long-term projects, businesses and start-ups. At the same time, a regulated and orderly operation provides investment opportunities for individuals, organisations, insurance companies and pension funds.
This very important sector has grown significantly over the last decade. Already the assets under management of the investment funds are close to €12 billion, and it is noteworthy that €2.5 billion have been invested in Cyprus and have financed projects and businesses in the Republic of Cyprus, contributing to growth, expanding our productive base, creating jobs.
Of particular importance for the local investment fund market is, I believe, the Financing Agreement that I recently signed with the European Investment Fund for the creation of the Cyprus Equity Fund, the first sovereign wealth fund in Cyprus. The State will finance the Fund to the tune of €30 million, while the participation of private capital is expected to be even more significant. The investment focus of the new Fund will be mainly on start-up and innovative Cypriot companies.
The European Investment Fund has already launched the Call for Proposals for the selection of a Fund Manager, which we hope will also attract strong interest from the local investment fund ecosystem.
More broadly, as a member state of the European Union and through the contribution of the European bodies and all member states, Cyprus has created a solid legal framework, which adapts and evolves according to circumstances.
This modern legal framework that has been created is the result of the cooperation of the Ministry of Finance, the Cyprus Securities and Exchange Commission and the private sector, which your Association represents. And for this I would like to thank you!
At this stage, through the initiative of the Securities and Exchange Commission and the professionals, we are in the process of legislating the sector of Cyprus Management Companies of Collective Investment Schemes, a bill which will add specificity to the services provided and complete the basic legislative framework. The basic principle of the proposed Bill is the licensing and supervision of organisations to carry out the functions of the administration of collective investment undertakings, if they are entrusted with such work by investment managers.
The European Union could not fail to adapt to the challenges arising from the development of innovative technologies in the financial sector. The proposal on cryptocurrency markets, as well as the proposal on the digital operational resilience of the financial sector are typical Union responses to the ever-changing environment, which will protect markets from potential risks while providing opportunities for sustainable growth.
The investment fund sector is directly dependent on the general economic environment in Cyprus and more broadly. The economic impact of the COVID-19 pandemic, and subsequently, Russia's invasion of Ukraine, have and continue to exert significant pressure on growth. But with prudent economic policy, the Ministry of Finance and the Government are maintaining economic stability and the right conditions for growth.
As I have mentioned in other recent interventions, we have already entered a new economic era. An economic era which has one main feature. The need to decouple from fossil fuels and the green transition. An era that follows a decades-long economic period in which Europe's prosperity was largely built on relatively low energy prices.
The resilience of any economy, and the cost, social and economic, of adapting to the new era, will depend on how quickly it makes the green transition. A transition that will require billions of investment in green projects, in energy upgrading projects, in renewable energies, especially if the fit-for-fifty-five package is adopted at European level.
The funds contained in the Recovery Fund, 41% of which are for green transition projects, are a start, but we must be honest. It is not enough. Billions in public, and to a greater extent, private investment is needed in the coming years. And to make these investments, alternative forms of borrowing are also needed.
In relation to public borrowing, the Government has already made preparations to adopt the "green bond" which we intend to issue around the end of the year. With more favourable than usual terms for financing green transition projects.
In terms of private investment, the investment fund sector has a key role to play in this new era, given the more conservative approach adopted by the banking sector, not only in Cyprus but also internationally.
It is very important the role that investment funds can play in the future, especially those that prioritise the area of sustainability and sustainability, the ESG Funds (Environmental Social Governance).
I am sure that the rapidly growing, but by no means saturated sector of Investment Funds in Cyprus, will also contribute to this great challenge of our economy. The biggest challenge we will have to face in the coming years.
Friends,
To sum up, the challenges have been and still are to a greater extent in a rapidly changing economic environment. We must face them together as we have been doing for the past ten years since the establishment of your Association.
And it is in this context that I want to thank the management and staff of CIFA and the Securities and Exchange Commission for their continued efforts and excellent cooperation with the Ministry of Finance. There is indeed a collective effort to find solutions to possible differences of opinion, always bearing in mind the provision of the most effective supervision possible.
I would also like to thank the participants in the investment fund market, with many of them located abroad, who trust our efforts and choose Cyprus as the jurisdiction for their business.
I assure that the Government will continue to directly support the sector, through harmonisation with best European practices but at the same time maintaining favourable conditions, making Cyprus an attractive destination for new businesses and investments.
Thank you.
(BG)
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