John Sergides: ‘Cyprus’ future lies in Financial Services 2.0’

GOLD magazine recently sat down with John Sergides, CEO of MUFG Investor Services – the fifth largest fund administrator in the world – to discuss the company’s remarkable growth since the opening of its office in Limassol last year, and the expected benefits that its presence on the island will bring to the local economy.

“Working at MUFG is not just a job,” says John Sergides in a measured voice that carries the weight of conviction.

Inside a brightly lit conference room at the Amathus Beach Hotel in Limassol, the CEO of MUFG Investor Services, a formidable titan of fund administration, is dressed in casual clothes, radiating an air of seasoned authority as he talks about the company’s remarkable growth since establishing a foothold in Limassol just one year ago. “My family grew up in Limassol,” he tells GOLD. “Here, people typically stay in their jobs their whole life. Japanese culture is very much like this, too; working for us is like being part of a family.”

In 2013, Japan’s MUFG (Mitsubishi UFJ Financial Group), the fifth largest bank in the world, now carrying a balance sheet in excess of US$3.3 trillion, entered the fund administration space by creating MUFG Investor Services. The division’s mission was to provide integrated solutions to the funds industry, which boasted some $53 trillion in assets allocated globally at the time while today, north of US$100 trillion-worth of assets sit in pooled investments overseen by fund managers.

The industry occupies a pivotal position within the modern economic framework, fuelling employment and economic expansion by channelling capital to businesses deemed promising. In the process, returns aid investors in pursuing their financial goals, from education to retirement or, in some cases, to simply becoming extremely wealthy. However, with the onset of increasingly demanding regulatory mandates and the escalating expenses tied to reporting and compliance, fund managers have found themselves mired in operational costs. Turning to third-party providers of fund administration has enabled them to curtail these burdens and concentrate on their fundamental strengths.

Sergides joined MUFG Investor Services from UBS in 2014. The significance of the fund administration business within UBS pales in comparison to its status within MUFG, where it constitutes one of the bank’s main pillars. Inside the air-conditioned cocoon of the conference room, Sergides mentions with a contemplative nod, “The Japanese have an ethos and philosophy which is very much in lockstep with what this sector needs.” He elaborates that this is based on long-term thinking, substantial investment over extended periods, stability and unwavering commitment.

Among a host of other factors that underpin the Japanese philosophy is treating employees as valued individuals rather than mere resources. At MUFG Investor Services, retention rates significantly outshine industry norms – they are less than a quarter of the industry average – and the new Limassol office serves as a tangible embodiment of the company’s steadfast dedication to nurturing long-term careers. The workplace is designed to be more than just a site for daily tasks but one where employees can find enjoyment, pride and a sense of belonging. In fact, Sergides identifies the company’s ability to maintain its extraordinarily low turnover rate as one of the three reasons behind its success. The second reason is its impressive organic growth; in a mature industry where growth rates typically hover around 5% to 8% but MUFG Investor Services has achieved 30%. Importantly, this growth has been achieved without relying on acquisitions.

Lastly, Sergides underscores the significance of the culture of the company, which is a magnet for top talent, attracting professionals from renowned firms such as Goldman Sachs, JP Morgan, Morgan Stanley and even hedge funds. This allure finds its ultimate testament in MUFG Investor Services’ current standing as the fifth-largest fund administrator globally, boasting an impressive $776 billion in assets under administration.

A mere few hours subsequent to this interview, Sergides was slated to make his way to the company’s Limassol office, where the inaugural opening ceremony will take place. High-ranking government officials, including President Nikos Christodoulides, were due to attend. In June 2023, in the context of the Government’s courtship of big business, President Christodoulides invited foreign investors to a roundtable discussion and, naturally, MUFG Investor Services was on the list. One of the topics discussed was the drafting of dedicated fund administration legislation. “It’s a very positive step,” remarks John Sergides, reflecting on the Government’s positive reception to the suggestion. “It will allow us to move and to grow functions which don’t currently exist here.” Delving into the specifics, he highlights key areas such as industrial operations, client AML and KYC procedures, domains characterized by substantial manual involvement, necessitating a human touch and a commensurate increase in the workforce. Indicatively, the MUFG Investor Services Limassol branch currently employs 165 people and plans to grow that number to more than 400 over the next two years. The impending legislation, in Sergides’ view, promises a systematic and much-anticipated framework for the build-up of these crucial aspects of the company’s operations and is viewed as an integral part of its growth plans in Cyprus. Nonetheless, he suggests that the country needs to move on from roundtable discussions, characterised by prolonged deliberations, to the establishment of a dedicated government body, which will expedite decision-making. In today’s competitive landscape, where other jurisdictions can enact changes within days or weeks, the efficiency of such a system cannot be overstated.

The arrival of MUFG Investor Services in Cyprus and the Government’s interest in creating a legislative framework to support fund administration operations might suggest that the road is now open for major custodians – essentially the protectors of investors’ assets. Luxembourg and Ireland, as major European domiciles, collectively manage trillions of euros in assets, with MUFG Investor Services also operating as a custodian in these jurisdictions. However, Sergides argues that Cyprus, given its relatively diminutive market size, primarily applies custodianship to locally registered funds domiciled in the country, ranging from €10 million to €20 million, a number that fluctuates over time but never to extremes. Maintaining these smaller funds’ status quo necessitates continuous effort, making it challenging for larger institutions to initiate global custodian services locally. Drawing from the cautionary tale of Malta, he emphasises the need for prudence in expanding custody businesses and recounts a scenario in which a few local custodians suffered losses due to misplaced investor funds, significantly affecting their standing within the local financial ecosystem.

For Sergides, the real potential for Cyprus in the broader financial industry lies elsewhere. “What are Cyprus’ ambitions for the financial services sector?” he asks. “Cyprus has always relied on local banking, trusts, corporate services, wealth management, as well as the support of accounting and legal firms. But when you look to the future, it lies in Financial Services 2.0,” he says. In this new world, the focus should not be on the simple addition of a few more domiciles or custodians in the country but rather the creation of a sustainable middle class that contributes to the economy through work, consumption, investment, education and construction.

The key to success, Sergides contends, lies in attracting a multitude of companies and professionals to Cyprus to service the industry, recognising and capitalising on the advantages that already exist – advantages such as the legal framework, higher education opportunities and the talent pool, which has remained resilient despite recent contractions in the financial services sector. In this transition, providing opportunities for the younger generation is paramount. This entails stemming the exodus of talented young people who, in search of greener pastures, seek opportunities abroad. The crux of the matter, then, is engaging them from the outset of their careers.

A few months ago, MUFG Investor Services was one of the winners of an Invest Cyprus International Investment Award at a ceremony that lauds companies that have contributed significantly to the economy. To the discerning observer, one question that might naturally arise is this: With only a year of operations in Cyprus, does MUFG fit that criterion? In recent statements, the company’s Managing Director and Head of the Cyprus office, Ioannis Matsis, has set out the ambitious vision to contribute 0.15% of the country’s GDP within a few years. John Sergides is convinced that this objective is well within reach and reiterates that the ultimate goal should be to attract more financial services companies and their white-collar professionals to the island. He points out that the hedge fund industry has evolved over the past 30 years from being predominantly centred in major financial hubs to incorporating smaller, in-house asset managers that increasingly rely on service providers like MUFG.

Globally, there are well over a million individuals indirectly or directly employed by service providers serving the hedge fund industry. In Europe alone, there are approximately 400,000 such employees. The potential for Cyprus to attract this workforce is substantial. “This is what is going to drive growth – you can focus on the custody component or on attracting more domiciled funds but this opportunity is 100 times bigger. The question, then, becomes: how many can you sustain?” he says, alluding to the need for supporting infrastructure, including schools and public services to accommodate this growth. Interestingly, while MUFG Investor Services occasionally brings in individuals from other offices to maintain consistency in culture, work ethos and processes, the bulk of the workforce – well over 90% – consists of locals. Unlike expatriates, who might face additional hurdles when moving to Cyprus, the local workforce is already embedded in the community. And when expanding the office, the company will continue to place emphasis on the local market.

Sergides takes a moment to gather his thoughts. “When I drive down the road and I see the office,” he confides, “I feel a huge sense of pride.”

MUFG has undertaken similar journeys in other locations, such as Canada and Singapore, where it has actively engaged with both the economy and the community. This involvement includes providing sponsorship to universities and creating internship programmes, following the mantra that companies should aim to be net givers rather than just absorbers of resources. However, it is unmistakable that Sergides’ emotional bond with Cyprus imbues this endeavour with an even deeper resonance. He is, after all, one of those people who left the country in search of better opportunities and his return carries an air of personal redemption. As he mentions, “We need to find ways of not only investing in the local economy and communities but, much more importantly, engaging the millennial and Gen Z generations coming out of the colleges. Are we going to have a brain drain where people are forced to look for work overseas or can we create a top-tier career path in Cyprus for them? This is a goal worth pursuing.”

This interview first appeared in the October edition of GOLD magazine. Click here to view it.