Registered Alternative Investment Funds (RAIFs)

The New Alternative Investment Funds Law 2018

On July 31, 2018, the Cyprus Securities and Exchange Commission (CySEC) released the Alternative Investment Funds Law 2018, replacing the previous Law 131(I)/2014. This new legislation, governing Alternative Investment Funds (AIFs) in Cyprus, is currently available only in Greek. Provisions for Regulated Alternative Investment Funds (RAIFs) are detailed in Part VIII.

Cyprus Legislation Provides for Unlicensed Funds, Called Registered Alternative Investment Fund (RAIF)

The updated Cyprus AIF Law introduces “Registered Alternative Investment Funds” (RAIFs), which bypass the need for CySEC licensing.

RAIFs are overseen by a compulsory licensed Alternative Investment Fund Manager (AIFM), responsible for supervision and delivering essential services like risk management, compliance, and internal audits.

This law seeks to offer a cost-efficient fund option and significantly shorten the timeline for launching investment offerings.

Rising demand for unregulated funds in Cyprus has emerged from regions like China, the Middle East, and EU nations.

A Cyprus RAIF offers these benefits:
● No CySEC licensing required.
● Regulated by CySEC and applicable laws despite no license.
● Managed by an external AIFM, which can be based in any EU country.
● No minimum capital requirement, though a minimum investment applies (see below).
● Can be structured as a common fund, variable/fixed capital investment company, or limited partnership.
● May be open-ended or closed-ended.
● Can operate as an umbrella fund with multiple sub-funds.
● No investment restrictions, except RAIFs cannot be Funds of Funds, Money Market Funds, or Loan Origination Funds.
● Unlimited investors permitted.
● No cap on assets under management.

The RAIF framework simplifies fund creation by removing lengthy CySEC authorization processes, cutting licensing costs considerably.

Conditions for establishing an unregulated RAIF in Cyprus include:
● Management by an AIFM licensed in Cyprus or another EU state, handling supervision and reporting.
● The AIFM delivers mandatory services like compliance, risk management, and audits, as required for standard AIFs.
● Alternatively, a UCIT Manager or Cyprus Investment Firm (CIF) can manage an RAIF partnership investing at least 70% in illiquid assets (e.g., real estate, ships) if closed-ended.
● Soon, a “Mini Fund Manager” option may emerge, with legislation pending.
● A local depository (e.g., Cyprus financial institution or CIF) must be appointed.
● Bank accounts can be held globally with depository approval.
● CySEC requires notification of RAIF setup details and updates, maintaining a special register; operations begin upon register inclusion.
● Targets only well-informed or professional investors.
● Requires a minimum €500,000 investment within the first year.

View our booklet

For more details or assistance with setting up a Cyprus RAIF, contact us at
info@lplawyersfirm.com. We’re ready to guide and support you