Alpenfort Capital, a Swiss-headquartered investment group announced today that its Cyprus issuance platform, Alpenfort Investments Limited, issued its first actively managed certificate in Cyprus. The group informs that the certificate which is titled ‘open-end tracker certificate’ received its classification codes from the Cyprus Stock Exchange today.
Actively managed certificates are a popular financial instrument in Switzerland and several other finance centers. They combine the functionality of a mutual fund (without being legally treated as such) with the flexibility and cost-efficiency of a single transferable security. In the past years they have become popular as a tool to wrap asset management strategies as well as to securitize diverse assets ranging from real estate and private equity participations to cryptocurrencies.
The industry standard is to have actively managed certificates governed by Swiss law and issued with a Swiss ISIN through Swiss clearing infrastructure. The use of other jurisdictions is less common due partly to industry inertia and partly to regulatory and legal uncertainties.
Cyprus has always been the backwater of the structured finance industry due to its antiquated corporate law and the isolation of its securities market infrastructure from global clearing. This might be changing, Alpenfort says.
Cyprus is a unique jurisdiction within the European Union in that it neither has a capital gains tax on securities, nor a withholding tax on dividends or interest, and allows practically full deductibility of interest on borrowings. This makes Cyprus SPVs the functional equivalent of offshore issuance platforms within the European Union. Similar low- or no-tax structures do exist in other EU countries such as Luxembourg but they are way more expensive to set up and maintain, the company says.
“Cyprus has a well-developed corporate services infrastructure and a large pool of professional investment firms to do business with. The country’s investment market infrastructure is less developed than that of major European finance centers but it does cover the basic needs of issuers and investors”.
It is expected that Cyprus-issued actively managed certificates will fill a niche in the universe of issue structuring solutions available to the investment industry.
It is announced that the entire issue is to be privately placed and no admission to exchanges sought.