3. Registered Alternative Investment Funds (RAIFs)

Overview

• Description: The Registered Alternative Investment Fund (RAIF) in Cyprus is a flexible investment vehicle that operates without direct supervision from the Cyprus Securities and Exchange Commission (CySEC), relying instead on the oversight of an authorized Alternative Investment Fund Manager (AIFM).
• Characteristics:
  • Designed for professional and well-informed investors.
  • Not subject to direct regulation by CySEC but must be managed by a licensed AIFM.
  • Can be set up as an umbrella fund with multiple sub-funds.

RAIF Framework in Cyprus

1. Regulatory Framework:
   • Cyprus Securities and Exchange Commission (CySEC): Although CySEC does not directly regulate RAIFs, they oversee the AIFMs that manage these funds.
   • Legislation: Governed by the Alternative Investment Funds Law of 2018 (Law 124(I)/2018), which is aligned with EU regulations, particularly the Alternative Investment Fund Managers Directive (AIFMD).
2. Structure and Characteristics:
   • Legal Form: RAIFs can be structured in various legal forms, including a common fund (CF), investment company (IC), or limited partnership (LP).
   • Investment Scope: RAIFs have broad flexibility in their investment strategies, including investing in equities, bonds, real estate, and other asset classes, tailored to the fund’s objectives.
3. Management and Oversight:
   • Alternative Investment Fund Manager (AIFM): Each RAIF must appoint an AIFM, which is responsible for the fund's management, compliance, and reporting obligations.
   • Depositary: RAIFs must engage a depositary to safeguard assets and ensure regulatory compliance, usually a bank or financial institution.
4. Investor Protection:
   • Transparency: RAIFs are required to provide regular reporting to investors, including financial statements, net asset value (NAV) calculations, and risk assessments.
   • Regulatory Oversight: While RAIFs themselves are not directly regulated by CySEC, the AIFM managing the RAIF is subject to strict regulatory oversight by CySEC, ensuring adherence to EU standards.
5. Distribution and Marketing:
   • EU Passporting: Once established, RAIFs benefit from EU passporting rights, enabling them to be marketed and distributed across the EU without additional authorization.
   • Investor Access: RAIFs are tailored for professional and well-informed investors seeking flexible investment opportunities under a lightly regulated framework.

Advantages for Cyprus-based PCIS

• EU Membership: Cyprus, as an EU member, provides a regulatory framework that is fully aligned with EU directives, offering legal certainty and investor protection.
• Market Access: RAIFs in Cyprus benefit from the ability to market and distribute across the EU, providing access to a broad investor base.
• Regulatory Environment: Cyprus offers a stable and transparent regulatory environment, ensuring confidence among investors and fund managers.
• Tax Benefits: RAIFs in Cyprus can benefit from various tax advantages, including favorable tax treaties, exemptions on certain income types, and competitive corporate tax rates.
• Professional Infrastructure: Cyprus boasts a sophisticated financial services infrastructure, including experienced professionals in banking, law, and accounting, to support RAIF operations.
• Geographical Advantage: Strategically located at the crossroads of Europe, the Middle East, and Africa, Cyprus provides an ideal base for funds targeting diverse markets.