‘Cypriot businesses can turn to collective funds for alternative financing’

In times of crisis, identifying and taking advantage of opportunities is crucial for economic growth, the president of the Cyprus Investment Funds Association (CIFA), Andreas Yiasemides, said on Thursday.

Yiasemides acknowledged the importance of identifying alternatives beyond short-term horizons, something which could generate added value for investors.

In the current economic climate, the CIFA president explained, the strategy of central banks to combat inflationary pressures by increasing interest rates is a hot topic.

“Naturally, this decision has a direct and indirect impact on the entire population, we must acknowledge that the era of low interest rates has passed,” Yiasemides noted.

“This new state of things is something that everyone must understand and accept,” he added.

What is more, he noted that with the rise in the cost of money due to soaring inflation, coupled with the adverse effects of Covid-19 and geopolitical disruption, traditional financing methods, including but not limited to bank loans, have become increasingly expensive.

“Inflation, combined with the aftermath of the pandemic and geopolitical instability, have drastically changed the situation, as the cost of money has risen significantly, disrupting the previous normality of zero and negative interest rates,” he stated.

“Building on this assumption, we can look beyond the short-term horizon to identify alternatives, study them and ideally seize the opportunities that exist for economic growth,” he added.

Regarding Cyprus, Yiasemides noted that an ecosystem of investment funds has already been developed, providing an alternative financing method for businesses.

“Despite its young age, the industry has made a significant contribution to the country’s real economy,” he said.

Citing figures published by the Cyprus Capital Market Commission, Yiasemides noted that out of the total of 207 Collective Investment Organisations, 163 invest partially or fully in Cyprus.

The investment amount reached €2.2 billion at the end of 2022, corresponding to 23.4 per cent of Cyprus’ total Assets Under Management of €9.5 billion.

“The growth of investment funds is reflected in the financing of various projects both inside and outside Cyprus,” he stated.

The CIFA president went on to explain that Investment funds are increasingly becoming an important pillar of financing worldwide, providing reliable alternatives for businesses to implement strategic and development plans.

In the context of efforts to upgrade and diversify the Cypriot economy, finding alternative and complementary ways of financing the real economy must be a priority, Yiasemides explained.

“Investment funds can provide either the necessary equity capital or overall financing for a project,” he said.

“Although the investment funds industry has been affected by successive crises, it has the potential to provide solutions and alternatives for businesses,” he added.

Yiasemides concluded by saying that with access to international markets, Cyprus can take advantage of the increasing percentage of new projects and businesses funded by collective investment schemes worldwide.