Cyprus’ robust fund framework and status as a top ship management centre place it at the crossroads of alternative credit and maritime financing, according to Michalis Vasiliou, executive director at H.M. Pelagic Partners Ltd and board secretary at at the Cyprus Investment Funds Association (CIFA).

“Alternative credit is one of the fastest-growing segments in Europe’s fund industry,” he said, citing IMF estimates that put the global private credit market at more than USD 2.1 trillion.

For investors, he explained, the appeal lies in connecting capital to the real economy through flexible financing tools.

The timing, he added, could not be more relevant. With Maritime Cyprus 2025 set for October 6-8 and the International Funds Summit following on November 3, both events will provide platforms to examine how these two worlds are beginning to converge.

Vasiliou noted that private credit has expanded rapidly in Europe as banks, constrained by regulation, scaled back certain lending activities.

“The European Central Bank notes that private markets, including private credit, are now an important complement to bank lending in the euro area,” he said.

Monetary policy has reinforced this trend. With euro area rates moderating, borrowers face a lower cost of capital while traditional bond yields narrow.

“In the U.S., the Federal Reserve has also recently cut rates and signalled possible further reductions in 2025, though these remain data-dependent,” he explained.

For shipping, he added, which raises financing across multiple jurisdictions, shifts in both U.S. and European rates directly influence the cost of capital and investor appetite for alternative credit.

Turning to Cyprus, Vasiliou underlined the island’s dual strength. “Cyprus combines two long-standing advantages,” he said, referencing “its position as a recognised EU fund centre and its role as one of the world’s top ship management hubs, accounting for about 20 per cent of global third-party ship management”.

This dual identity, he explained, creates natural synergies and offers Cyprus a platform to explore innovative strategies at the intersection of funds and shipping.

Shipping itself, he argued, is a strategic case study. “It is among the most capital-intensive industries, requiring financing for vessels, retrofits, and working capital,” he said.

Banks and export credit agencies traditionally provided this funding, but their role has diminished. As a result, there has been growing interest in alternative structures such as leasing, sale-and-leaseback, and asset-backed financing. “These solutions offer flexible terms that connect investor capital to real assets,” he said.

For investors, Vasiliou pointed out, “the attraction is clear: maritime credit provides exposure to shipping without direct correlation to market cycles”.

“Unlike equity investments, which rise and fall with freight rates and asset values, credit structures can prioritise contractual cash flows and predictable yields,” he said.

This, he added, makes them especially appealing to non-shipping investors seeking diversification without the volatility of shipping equities.

Nevertheless, governance and risk awareness remain essential. Vasiliou referred to the European Central Bank’s concerns around valuation opacity, leverage and liquidity mismatches. He also drew attention to geopolitical risks.

“The U.S. Trade Representative’s recent Section 301 action introduced new port-entry service fees for vessels with Chinese ownership, operation, or Chinese-built nexus, scheduled to take effect from October 2025 after a grace period,” he said.

While details remain subject to adjustment, such measures, he explained, create uncertainty for ships financed through Chinese leasing structures.

This, according to him, underscores the importance of diversified funding sources and demonstrates how European credit frameworks can provide resilience and clarity for global investors.

Vasiliou argued that the rise of alternative credit is reshaping Europe’s fund industry, with shipping providing a clear example of how real-economy sectors can link with innovative financing strategies.

“As the upcoming Maritime Cyprus 2025 explores the industry’s future and the Funds Summit gathers global managers, Cyprus has a timely opportunity to frame its dual strength as both a fund jurisdiction and a maritime centre,” he said.

“The next chapter in Europe’s funds industry will be defined by how effectively managers link innovative financing with real-economy needs,” he added.

“Cyprus, with its maritime heritage and fund architecture, is well placed to anchor this wave,” Vasiliou concluded.