Alternative Investment Funds
In 2014, Cyprus introduced the Alternative Investment Funds (AIFs) Law; CySEC further updated the aforesaid framework in 2018. The Law introduced a regulatory regime for undertakings in collective investments, including compartments thereof which;
Raise capital from a number of investors with a view of investing said capital in accordance with a well-defined investment policy for the benefit of those investors and do not require authorisation as an Undertaking in Collective Investments in Transferable Securities or UCITS.
These AIFs are subject to authorisation and ongoing prudential regulation by CySEC.
The framework provides for the characteristics of the AIFs that can be set up in one of the following legal forms:
- As a mutual fund;
- As an investment company in the legal form of a limited liability company with shares, and;
- As a limited liability partnership.
An AIF that is set up as an investment company can be self-managed (i.e. does not appoint an external fund manager). In the case of AIFs set up as mutual funds or as limited liability partnerships, these must always be externally managed.
Where the assets of the AIF do not exceed the thresholds set by the AIFMD, the AIF can be managed by an Investment Firm authorised under the MiFID Directive or a UCITS Management Company, or by a company authorised to manage AIFs whose assets do not exceed the AIFMD thresholds. In cases where the assets of the AIF exceed the aforesaid threshold, said AIF is always managed by an entity authorised under the AIFMD.
Where the AIFs are not managed by entities authorised under the AIFMD, the AIF Law sets the obligations, which are (non-exhaustive list):
- Appointment of a Depositary;
- Reporting and disclosures to investors;
- Marketing rules;
- Reporting to CySEC, and;
- Organisational requirements for external managers.
The AIF Law allows for the establishment of a novel type of vehicle, the AIFLNP (AIF with Limited Number of Persons). This vehicle allows for the establishment of an AIF with up to fifty investors and whose assets will not exceed the AIFMD thresholds. This type of AIF can be self-managed or where it is externally managed it is managed by specific entities exempted from being authorised under the AIFMD. In addition to the above, the AIFLNPs can be exempted from the requirement to appoint a depositary.
CySEC, in 2018, introduced the concept of registered AIFs (RAIFs). A RAIF can take up any of the legal forms as a normal AIF but it is always externally managed by an authorised AIF Manager (AIFM). Authorised AIFMs are entities authorised in the EEA pursuant to the AIFMD or a third country AIFM who has set an EEA member state as the state of reference and has received the appropriate authorisation by the aforesaid member state of reference. Moreover RAIFs are not subject to authorisation by CySEC, however AIFMs intending to manage a RAIF will be required to submit a notification to CySEC for the inclusion of the RAIF on CySEC’s RAIF registry prior to distributing RAIF units to possible investors.
With its multifaceted experience in the financial sector, MAP S.Platis can offer the following services in relation to AIFs, RAIFs and AIFLNPs:
- Setting up the entity(ies) to be authorised as an AIF or AIFLNP or the entities to be registered as RAIFs;
- Submitting and promoting the AIF or AIFLNP authorisation application to CySEC;
- Submitting and promoting the RAIF notification to CySEC;
- Setting up the internal procedures of the AIF or AIFLNP or RAIF;
- Ongoing Compliance Support;
- Internal Audit;
- Staffing solutions;
- External Audit solutions, and;
- Fund Administration.
For more information, please feel free to contact us