Cyprus offers an attractive and competitive Alternative Investment Fund (AIF) industry. The relevant AIF legislation is dully harmonized with EU Laws and Directives. Funds are operating in a properly regulated environment with an attractive set-up and maintenance costs. Furthermore Cyprus offers a complete package of investment fund services ranging from licensing to ongoing administration.
AIFs are available in various forms that we will mentioned below. A special reference should be made to the Registered Alternative Investment Fund (RAIF), which has easier and faster setup and licensing procedures and also involves a significantly lower cost. The tax aspects applicable to AIFs operating via a Cyprus resident company follow the same tax provisions as all other Cyprus resident companies.
AIF Legal Forms
An AIF can take the following legal forms and may be established with limited or unlimited duration:
• Fixed Capital Investment Company (FCIC).
• Variable Capital Investment Company (VCIC).
• Limited Partnership (LP).
• Common Fund (CF).
Investment Manager
A Variable Capital Investment Company (VCIC) and Fixed Capital Investment Company (FCIC), may be set-up as internally managed, or it may be externally managed. A Limited Partnership (LP) and Common Fund (CF) must always appoint an external manager.
There two types of AIFs in Cyprus: Alternative Investment Fund with Unlimited Number of Persons and Alternative Investment Fund with Limited Number of Persons.
Alternative Investment Fund with Unlimited Number of Persons
• May be marketed to retail, or well informed and/or professional investors.
• Freely transferable investor shares.
• Must appoint a Depositary.
• Can be listed on a recognized stock exchange, and AIFs marketed to retail investors can be traded.
• May be internally managed.
• Minimum share capital requirements of €125.000 are valid for internally managed.
• May be subject to certain investment restrictions depending on the investor type and the overall investment policy. AIFs addressed to WIPIs shall not be subject to investment restrictions, except Loan Origination Funds, Money Market Funds, Venture Capital Funds and Fund of Funds.
Alternative Investment Fund with Limited Number of Persons
• May be marketed only to well-informed and/or professional investors (WIPIs).
• Maximum number of investors limit is set to 50.
• Freely transferable investor shares, with the condition that their transfer does not result in the AIF having more than 50 investors.
• May not be required to appoint a Depositary in certain circumstances such as when its total assets do not exceed €5 million, including any investment compartments thereof, or its instruments of incorporation limit the number of its unitholders to five persons for the duration of the life of the AIF, or 90% of the assets are not subject to custody and the number of investors are limited to twenty five and provided each investor subscribes a minimum of €500.000.
• Assets under management do not exceed the AIFMD thresholds of €100 million (including leverage) or €500 million (without leverage, 5 year lock up period for investors).
• May be internally managed.
• Minimum share capital requirements of €50.000 are valid for internally managed funds.
Key Benefits of Cyprus AIF
• Cost-efficient and simple to set-up, manage and operate.
• Modern regulatory framework fully in line with relevant EU Directives.
• Increased flexibility as a number of asset classes can be included in an AIF investment strategy.
• Significant tax incentives offered by the country’s advantageous tax framework.
• Full transparency through annual audited reports to CySec and investors, which include financial statements, borrowing information, portfolio information and Net Asset Value.
• Supervised by a competent and accessible regulatory authority.
Registered AIFs (RAIFs)
RAIFs are new and innovative fund scheme, that it was launched in Cyprus in 2018. It is addressed to Professional and Well-informed Investors and offer a quick and cost efficient fund launch of only one month from the date of filling a duly completed “notification pack” to regulator CySec, which will include the AIF in the list of RAIFs.
Cyprus RAIF will be able to market to investors across the EU and will be managed by a full scope Cyprus or EU Alternative Investment Fund Manager (AIFM).
Although the RAIF is not ‘authorized’, it is indirectly subject to regulatory oversight, through its AIFM. In addition to the full scope AIFM, a sub-threshold AIFM which is subject to prudential regulation, a MiFID Investment Firm and UCITS management company established in Cyprus or any EU Member State may also manage a RAIF, provided it is a closed-ended limited partnership and invests more than 70% in illiquid assets.
Key Benefits of a RAIF
• No licensing required.
• No minimum capital requirements.
• No investment restrictions.
• Multiple compartments possible.
• Can operate as or open or close ended.
• Units of RAIFs may be listed.
• Requirement to appoint local Depository.
• Addressed solely to Well- Informed and Professional Investors.
UCITS
UCITS, stands for Undertakings for the Collective Investment in Transferable Securities. This refers to a regulatory framework that allows for the sale of cross-Europe mutual funds. UCITS funds are perceived as safe and well-regulated investments are popular among many investors looking to invest across EU. UCITS Legal Forms are Variable Capital Investment Company (VCIC) and Common Fund (CF).
Key Benefits of Cyprus UCITS
• Full EU passporting rights. Cyprus UCITS can be marketed and sold in other EU Member States.
• Cost efficient to set-up and operate in Cyprus.
• Low investment risk and internationally regarded as one of the most efficient asset management tools.
• Robust legislative framework that protects and promotes investor interests.
• Possibility to set up umbrella funds, allowing different sub-funds and share classes.
• Investments are fully transparent and easy to monitor through publication of Net Asset value, which is made at least every fortnight on the first business day.
• Upon request, investors are entitled to repurchase or redeem their units from the assets of the UCITS.
• Highly skilled pool of professionals in Cyprus.
• Supervised by a competent and accessible regulatory authority.
Our services includes:
• Providing to our clients with the analysis of the provisions and the implications of the UCITS, AIF and RAIF law.
• Submission of the application to the Relevant Authority - CySeC and the ongoing monitoring of the status of the application.
• Drafting on behalf of our clients, the necessary legal documents for the incorporation and the establishment of both UCITS and AIFs.
• Any ongoing provisions of administrative services including the appointment of nominee officers, office facilities, administration of affairs, accounting, audit, tax services.