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Cyprus Alternative Investment Funds (AIF)

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Cyprus Alternative Investment Funds (AIF)

Cyprus is currently the fastest growing fund centre in Europe thanks to its modern funds legislation fully in line with all relevant EU Directives and its well-established network of financial and professional service providers. Alternative Investment Funds (AIF) are new investment vehicles as per the Alternative Investment Fund Managers Directive 2011/61/EU.

Cyprus Alternative Investment Funds (AIF)

What are Cyprus Alternative Investment Funds (AIF)?

Alternative Investment Funds (AIF) are all investment funds that are not already covered by the European Directive on Undertakings for Collective Investment in Transferable Securities (UCITS),  and that are registered as per the AIF Law (2014) of Cyprus. This includes hedge funds, funds of hedge funds, venture capital and private equity funds and real estate funds.

Compared with other forms of funds, Alternative Investment Funds (AIF) are a more flexible investment vehicle especially suitable for the purposes such as equity funds, venture capital funds or real estate funds of private investors or smaller groups of investors. The minimum paid up capital of Cyprus Alternative Investment Funds (AIF) is EUR 125.000.

As all EU AIFs, Cyprus Alternative Investment Funds (AIF) do fully enjoy EU passporting, which means that they are allowed to conduct fund business in the entire EU.

Please see further below for more information.

What are Cyprus Alternative Investment Funds with a Limited Number of Persons (AIFLNP)?

Cyprus Alternative Investment Funds with a Limited Number of Persons (AIFLNP), registered as per the AIF Law (2014) of Cyprus, are restricted in the max. number of unit holders to max. 75, and they may only be marketed to professional and/or well informed investors. The maximum portfolio of assets managed is EUR 500 million if unleveraged or EUR 100 million if leveraged.

In return, AIFLNPs are less regulated and do not require a minimum paid-up capital.

Please see further below for more information.

Why to Choose Cyprus for Alternative Investment Funds (AIF)?

Compared with other EU jurisdictions, Cyprus provides a number of important advantages:

  • A modern regulatory framework for Cyprus Alternative Investment Funds (AIF), fully in line with all relevant EU Directives.
    The EU AIF Directive was published in 2011, but Cyprus was actually a bit late with its implementation of the EU AIF Directive into national law, introducing the Cyprus AIF Law in July 2014. However; sometimes, delaying may provide advantages! By being late with its implementation into national law, Cyprus had the chance to learn from the mistakes or a bit infortune legal solutions of other EU member states. Thus, Cyprus is now enjoying a modern and sophisticated legal environment for Cyprus Alternative Investment Funds (AIF).

  • There are no restrictions for Cyprus Alternative Investment Funds (AIF) regarding the type of investments.

  • A Cyprus Alternative Investment Fund (AIF) can be self-managed by its Board of Directors, under certain conditions and subject to approval by CySEC.

  • Cyprus Alternative Investment Funds (AIF) are not obliged to report to the Regulator on a time-consuming ongoing basis.

  • The set-up and maintenance costs for Cyprus Alternative Investment Funds (AIF) are low, compared with other EU jurisdictions.

  • The application process of Cyprus Alternative Investment Funds (AIF) is quite simple and not much time consuming.

  • Cyprus Alternative Investment Funds (AIF) are benefiting from the tax incentives of Cyprus, such as, for example, no withholding tax on dividends paid to foreign investors and Cyprus corporate entities, and no taxation on capital gains.

  • Cyprus Alternative Investment Funds (AIF) are eligible to benefit from the Double Taxation Agreements of Cyprus.

  • Services provided by independent investment managers and fund administrators are exempted from VAT.

  • Cyprus Alternative Investment Funds (AIF) without limitation of unit holders (investors) can be listed on all recognised Cyprus and EU stock exchanges and freely traded to retail investors.

  • Cyprus Alternative Investment Funds (AIF) can be set up as umbrella funds with multiple sub-funds managing multiple investment pools with separate investment policies.

  • Cyprus Alternative Investment Funds (AIF) provide full transparency for the investors, through annual audited reports to the Regulator CySEC.

 

Cyprus Funds for Alternative Investments

Cyprus Alternative Investment Funds (AIF) – Legal Forms

Cyprus Alternative Investment Funds (AIF) may be set up in the following legal forms:

  • Common Funds
    A common fund is a form of collective investment scheme based upon contractual law rather than being enacted through a corporation or partnership;

  • Fixed Capital Investment Company (FCIC)
    A private limited liability company registered in Cyprus (“Cyprus Ltd”), with fixed capital;

  • Variable Capital Investment Company (VCIC)
    A private limited liability company registered in Cyprus (“Cyprus Ltd”), with variable capital;

  • Limited Partnership
    A limited partnership registered in Cyprus.

Cyprus Alternative Investment Funds (AIF) – Management

Cyprus AIFs can either be self-managed or externally managed.

Common Funds and AIFs in the form of a limited partnership must be managed externally. If a Cyprus Alternative Investment Fund (AIF) is set up as a limited partnership, the general partner of the partnership may act as the external manager of the AIF.

Self-managed Cyprus Alternative Investment Funds (AIF)

Cyprus Alternative Investment Funds (AIF) and Cyprus Alternative Investment Funds with a Limited Number of Persons (AIFLNP) that are self-managed must have the legal form of a company. The AIF is then managed by at least two persons, being members of the Board of Directors, who can proof sufficient experience.

Self-managed Cyprus Alternative Investment Funds (AIF) may manage assets up to EUR 500 Mio, if leverage is not employed by the AIF and under the conditions that the unit holders (investors) have no redemption right for the period of five years, or manage assets up to EUR 100 Mio including leverage.

While the minimum paid-up capital requirement for Cyprus Alternative Investment Funds (AIF) is EUR 125.000, the minimum paid-up capital requirement increases to EUR 300.000 in case of self-managed AIFs. There is no limited paid-up capital requirement for Cyprus Alternative Investment Funds with a Limited Number of Persons (AIFLNP), even if they are self-managed.

Externally managed Cyprus Alternative Investment Funds (AIF)

Cyprus Alternative Investment Funds (AIF) with an unlimited number of unit holders (investors) may be managed externally by a licenced Alternative Investment Fund Manager (AIFM), a licenced UCITS Management Company or a Cyprus Investment Firm (CIF) licenced by CySEC.

Cyprus Alternative Investment Funds with a Limited Number of Persons (AIFLNP) are not allowed to be managed by an Alternative Investment Fund Manager (AIFM), but only by UCITS Management Companies, a Cyprus Investment Firm (CIF) licenced by CySEC, or by a company solely incorporated for the management of the AIF, whereas its suitability to manage the AIF will be examined by CySEC.

Cyprus Alternative Investment Funds (AIF) – Overview

  • Legal Forms: Common Fund, Variable Capital Investment Company (VCIC), Fixed Capital Investment Company (FCIC), or Limited Partnership (LP);

  • Allowed Investors: professional and/or well-informed investors, or retail investors;

  • Number of Investors: unlimited;

  • Minimum paid-up capital: EUR 125.000, but EUR 300.000 when self-managed; in case of Cyprus Alternative Investment Umbrella Funds, the requirement applies for each separately managed asset pool;

  • Investment Manager: Can be self-managed in case of companies, or may appoint an external fund manager;

  • Assets under Management: No restrictions if external Alternative Fund Manager (AIFM) is appointed; otherwise, EUR 100 Mio with leverage and EUR 500 Mio without leverage, and no redemption rights for five years;

  • Depositary: if a Cyprus Alternative Investment Funds (AIF) is managed by an external fund manager, appointing a depositary in Cyprus is mandatory; if no external fund manager is appointed, depositary may be in Cyprus, the EU or outside the EU; if the total assets of the AIF are not subject to custody, a depositary may be waived.

Cyprus Alternative Investment Funds with a Limited Number of Persons (AIFLNP) - Overview

  • Legal Forms: Variable Capital Investment Company (VCIC), Fixed Capital Investment Company (FCIC), or Limited Partnership (LP);

  • Allowed Investors: professional and/or well-informed investors;

  • Number of Investors: up to 75;

  • Minimum paid-up capital: no minimum paid-up capital requirement;

  • Investment Manager: Can be self-managed in case of companies, or may appoint an external fund manager;

  • Assets under Management: EUR 100 Mio with leverage and EUR 500 Mio without leverage, and no redemption rights for five years;

  • Depositary: Cyprus, the EU or outside the EU; a depositary may be waived, if one of the following criteria applies: a) total assets of the fund are less than EUR 5 Mio, or b) the total number of unit holders (investors) does not exceed 5, or c) total assets of the fund are not subject to custody.

 

Shanda Consult can assist you with its own and external experts for legal advice, formation of a Cyprus Company, preparation of the licence application as AIF, liaising with CySEC, assisting in localisation procedures (setup of office and recruitment), and other. Please contact us.

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