Description: AIFs are funds that do not qualify as UCITS and can include hedge funds, private equity funds, real estate funds, and more.
Types:
AIF with Unlimited Number of Persons (AIFUNP): Suitable for a large number of investors, including retail investors.
AIF with Limited Number of Persons (AIFLNP): Limited to 50 investors and typically aimed at professional and well-informed investors.
Registered AIF (RAIF): Does not require prior authorization from CySEC but must be managed by an authorized AIFM.
Regulation: Governed by the AIF Law of 2018 and must comply with certain regulatory requirements, including risk management and investor protection measures.
AIF Framework in Cyprus
Regulatory Framework:
AIFMD Compliance: Cyprus implements AIFMD regulations, which harmonize the regulation of alternative investment funds across the EU.
Cyprus Securities and Exchange Commission (CySEC): CySEC is the competent authority in Cyprus responsible for regulating and supervising AIFs and their managers.
Types of AIFs:
Categories: AIFs in Cyprus can be structured as open-ended or closed-ended funds, depending on their redemption terms and liquidity.
Strategies: AIFs can pursue a wide range of investment strategies, including private equity, real estate, hedge funds, infrastructure, and venture capital.
Fund Manager Requirements:
AIF Manager: AIFs must appoint an AIF manager (AIFM) licensed by CySEC to manage the fund’s operations and comply with regulatory obligations.
Operational Requirements: AIFMs must meet capital requirements, governance standards, and conduct ongoing reporting to CySEC.
Investment Scope and Restrictions:
Investment Assets: AIFs in Cyprus have flexibility in their investment strategies and can invest in a diverse range of assets and sectors.
Risk Management: AIFs must implement robust risk management policies and procedures to manage and mitigate risks effectively.
Investor Protection:
Transparency and Disclosure: AIFs are required to provide comprehensive disclosure to investors, including financial statements, risk management practices, and performance reports.
Custody of Assets: AIFs must appoint a custodian to safeguard assets and ensure compliance with regulatory requirements.
Marketing and Distribution:
EU Passporting: Once authorized by CySEC, AIFs in Cyprus can market and distribute their shares or units across the EU under AIFMD passporting rights.
Global Reach: Cyprus-based AIFs can attract global investors and benefit from Cyprus’ strategic location and regulatory framework.
Advantages for Cyprus-based AIFs
Strategic Location: Cyprus serves as a bridge between Europe, the Middle East, and Africa, offering geographical advantages for fund managers and investors.
Regulatory Environment: Cyprus provides a stable and transparent regulatory environment compliant with EU standards, enhancing investor confidence.
Tax Benefits: Cyprus offers a competitive tax regime with advantages for fund structuring, including tax exemptions on certain income and gains.
Skilled Workforce: Cyprus has a skilled and multilingual workforce, supporting the operational needs of AIFs and fund managers.
Infrastructure and Support Services: Cyprus has a well-developed financial infrastructure, including banking, legal, and accounting services, supporting the establishment and operation of AIFs.
