Alternative Investment Funds (AIFs)

Cyprus has emerged as the quickest-growing fund hub in Europe, thanks to its contemporary fund laws, fully aligned with EU Directives, and a robust network of financial and professional service providers. Alternative Investment Funds (AIFs), introduced under the Alternative Investment Fund Managers Directive 2011/61/EU, offer fresh investment options.

What are Cyprus Alternative Investment Funds (AIF)?

Cyprus Alternative Investment Funds (AIFs) encompass all investment vehicles not governed by the EU’s Undertakings for Collective Investment in Transferable Securities (UCITS) Directive, registered under Cyprus’s AIF Law (2014). These include hedge funds, funds of hedge funds, venture capital, private equity, and real estate funds. Unlike other fund types, AIFs provide greater flexibility, making them ideal for private investors or small groups targeting equity, venture capital, or real estate investments. The minimum paid-up capital for Cyprus AIFs is €125,000.

Like all EU AIFs, Cyprus AIFs benefit from EU passporting, enabling them to operate across the European Union.

More details are provided below.

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

Registered under the AIF Law (2014), Cyprus Alternative Investment Funds with a Limited Number of Persons (AIFLNP) cap unit holders at 50 and target only professional or well-informed investors. Their asset management limits are €500 million (unleveraged) or €100 million (leveraged).

AIFLNPs face lighter regulation and have no minimum capital requirement.
Further information follows below.

Why Choose Cyprus for Alternative Investment Funds (AIF)?

Cyprus offers distinct benefits compared to other EU jurisdictions:
● A forward-thinking regulatory framework for AIFs, compliant with all relevant EU Directives.
● The EU AIF Directive (2011) was enacted into Cyprus law in July 2014, a delay that allowed Cyprus to refine its approach by learning from other EU nations’ missteps, resulting in a polished legal setup.
● No investment type restrictions for Cyprus AIFs.
● Cyprus AIFs can be self-managed by their Board of Directors, subject to CySEC approval and specific conditions.
● Minimal ongoing reporting obligations to the regulator.
● Lower setup and operational costs than many EU peers.
● A straightforward and swift application process.
● Access to Cyprus’s tax perks, including no withholding tax on dividends to foreign investors or Cypriot entities, and no capital gains tax.
● Eligibility for Cyprus’s Double Taxation Agreements.
● VAT exemption for services from independent managers and administrators.
● AIFs with unlimited investors can list on recognized Cyprus and EU stock exchanges, tradable to retail investors.
● AIFs can operate as umbrella funds with multiple sub-funds, each managing distinct investment pools.
● Full investor transparency via annual audited reports to CySEC.

Cyprus Alternative Investment Funds (AIF) – Legal Forms

Cyprus AIFs can take these legal structures:
● Common Funds: Collective schemes based on contractual law, not corporate or partnership entities.
● Fixed Capital Investment Company (FCIC): A Cyprus-registered private limited company with fixed capital.
● Variable Capital Investment Company (VCIC): A Cyprus-registered private limited company with variable capital.
● Limited Partnership: A partnership registered in Cyprus.

Cyprus Alternative Investment Funds (AIF) – Management

Cyprus AIFs can be self-managed or externally managed. Common Funds and limited partnership AIFs require external management. For limited partnerships, the general partner can serve as the external manager.

Self-managed Cyprus Alternative Investment Funds (AIF)

Self-managed AIFs and AIFLNPs must be companies, overseen by at least two experienced Board members. They can manage up to €500 million (unleveraged, with no redemption rights for five years) or €100 million (leveraged). Minimum capital is €125,000 for AIFs, rising to €300,000 if self-managed, with no minimum for self-managed AIFLNPs.

Externally managed Cyprus Alternative Investment Funds (AIF)

AIFs with unlimited investors can be managed by a licensed Alternative Investment Fund Manager (AIFM), UCITS Management Company, or CySEC-licensed Cyprus Investment Firm (CIF). AIFLNPs cannot use AIFMs but can appoint UCITS Management Companies, CIFs, or a specially formed company, subject to CySEC suitability review.

Cyprus Alternative Investment Funds (AIF) – Overview

● Legal Forms: Common Fund, VCIC, FCIC, or Limited Partnership.
● Allowed Investors: Professional, well-informed, or retail investors.
● Number of Investors: Unlimited.
● Minimum paid-up capital: €125,000 (€300,000 if self-managed); for umbrella funds, per asset pool.
● Investment Manager: Self-managed (companies only) or external manager.
● Assets under Management: Unlimited with an external AIFM; otherwise, €100 million (leveraged) or €500 million (unleveraged, no redemptions for five years).
● Depositary: Mandatory in Cyprus if externally managed; otherwise, Cyprus, EU, or
non-EU, waivable if assets aren’t custodied.

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

● Legal Forms: VCIC, FCIC, or Limited Partnership.
● Allowed Investors: Professional or well-informed investors.
● Number of Investors: Up to 50.
● Minimum paid-up capital: None.
● Investment Manager: Self-managed (companies only) or external manager.
● Assets under Management: €100 million (leveraged) or €500 million (unleveraged, no redemptions for five years).
● Depositary: Cyprus, EU, or non-EU; waivable if assets < €5 million, investors ≤ 5, or assets not custodied.

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Papasavvas & Liskavidou LLC Support

Papasavvas & Liskavidou LLC offers expert legal advice, company formation, AIF license preparation, CySEC coordination, and localization support (office setup and hiring). Contact us at info@lplawyersfirm.com for details