The Alternative Investment Funds Law of 2018 provides for three types of investment funds in Cyprus.
Alternative Investment Fund (AIF)
An AIF is available to an unlimited number of investors, which can be promoted to any investor, encompassing retail investors.
AIFs may be established as variable or fixed capital investment companies, common funds and limited partnerships. A single depository must be appointed for each AIF, which is established either locally or in another EU Member state or in a third country.
AIFs can be either internally or externally managed. Initial capital for authorisation under the legislation is necessary only for self-managed AIFs, since they also act as the fund’s manager, which will be €125.000.
However, both externally and internally AIFs will have to raise capital of at least €500.000 during their first 12 months of operations. Its Board of Directors shall be comprised of at least 2 executive and 2 non-executive directors.
AIFs are subject to the Categorisation Directive, which specifies their investment policy, depending on the category of investors to which they are addressed or marketed.
Alternative Investment Fund with Limited Number of Persons (AIFLNP)
An AIFLNP is available to 50 investors or less, which can be marketed only to professional or well-informed investors. AIFLNPs, may be established as fixed or variable capital Investment companies and limited partnerships.
An internally managed AIFLNP has a dual role (fund and fund manager) and therefore the legislation has introduced an initial capital requirement for internally managed AIFLNPs of €50.000. AIFLNPs must reach €250.000 within the first 12 months of their operation.
A Depositary may not be appointed when (a) the total assets of the fund do not exceed €5 million, or (b) the number of unit-holders is limited to five, or (c) the number of unit-holders is limited to 25 and only 10% of the fund’s total assets are subject to custody, and each unit-holder has invested at least €500.000 in the fund.
The new legislation also clarifies that, when the AIFLNP is self-managed, its Board of Directors shall be comprised of at least one executive and two non-executive directors.
Registered Alternative Investment Fund (RAIF)
RAIFs will be registered in a Registry but will neither be authorised nor regulated directly by CySEC. It will still be considered as ‘AIF’ by virtue of the Law, offering new opportunities for a quick and cost-effective fund launch.
Their supervision and monitoring will be performed by the AIF Manager (‘AIFM’), managing the RAIF. They can be marketed only to professional or well-informed investors.
The RAIF can be organised in any legal form available under Cyprus Law, it can be open or closed ended and be established with multiple compartments. There are no restrictions in its investment strategy, however the RAIF cannot be set up as Loan Origination, Fund of Funds or Money Market Funds.
Third country AIFMs will also be able to register RAIFs to CySEC, provided that their country of establishment has granted passporting rights pursuant to the AIFMD. RAIFs may also use EU marketing passport via its AIFM.
| AIFLNP | AIF | RAIF | |
|---|---|---|---|
| Licensing | Licensed by the Cyprus and Exchange Commission (CySEC) | Registered with CySEC not licensed | |
| Legal Forms |
Variable Capital Investment Company (VCIC) Fixed Capital Investment Company (FCIC) Limited Partnership (LP) |
Common Fund (CF) Variable Capital Investment Company (VCIC) Fixed Capital Investment Company (FCIC) Limited Partnership (LP) |
|
| Eligible Investors | May only be marketed to “Professional” and/or “Well-Informed” investors | May be marketed to either “Professional” and/or “Well-Informed” or “Retail” investors | May only be marketed to “Professional” and/or “Well-Informed” investors |
| No. Investors | Up to 50 investors | Unlimited number of investors | |
| Min. Capital | EUR 50.000, if the fund is internally managed | EUR 125.000, if the fund is internally managed | N/A |
| Units |
May not be listed or traded but may be registered on a special registry kept with the Cyprus Stock Exchange May obtain an ISIN |
May be listed or traded on a regulated market or MTF | |
| Investment Manager | Can be internally managed or appoint an external Fund Manager | Obligation to appoint a Fund Manager (AIFM) | |
| Asset Classes | No restrictions | Subject to the Categorisation Directive | Cannot be set up as Loan Origination, Fund of Funds or Money Market Funds. |
| Assets under management | Up to EUR 100 ml including leverage or EUR 500 ml with no use of leverage and no redemption rights for 5 years |
No restrictions if AIFM appointed Up to EUR 100 ml including leverage or EUR 500 ml with no use of leverage and no redemption rights for 5 years if not AIFM appointed |
No restrictions |
| Depositary |
Cyprus, EU or in a third country based May be waived if one of the following criteria is met: – total assets of the Fund < EUR 5 mln – up to 5 investors – up to 25 investors with a minimum subscription of EUR 500.000 and only 10% of the Fund’s total assets are subject to custody |
Mandatory appointment of a local Depositary if managed by an AIFM Cyprus, EU, or in a third country based if AIFM not appointed. May be waived in case the total assets of the AIF are not subject to custody. |
Obligation to appoint a Depository |
| Umbrella Structure | YES | ||
