investment funds’ sector in Cyprus is quite developed, as the country has set in place various laws that enable local and foreign investors to operate here under advantageous conditions. Also, as a European Union member country, Cyprus offers various facilities to foreign investment funds entering the local market.
Alternative investment funds are widely spread at worldwide level, which is why they are recognized in Cyprus.
Below, our company formation specialists explain the procedures and conditions those who want to open an alternative investment fund in Cyprus must meet. They can rely on our local agents for guidance in setting up such a fund.
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The Cyprus Alternative Investment Funds (AIF) Law
The main law providing for the creation of an alternative investment fund in Cyprus is the act with the same name which provides for two types of funds that can be set up in this country:
- – the fund with an unlimited number of investors;
- – the fund with a limited number of participants.
Apart from this, there is also the Alternative Investment Fund Managers (AIFM) Directive established at EU level which also applies in Cyprus.
The current AIF Act was enabled in 2018 and it replaced the former law with the same law that contained several restrictions.
Foreign investors who decide to open an alternative investment fund in Cyprus can now benefit from more advantageous conditions.
Our Cyprus company formation advisors can offer more information on the new regulations applicable to AIFs.
Legal forms used to set up AIFs in Cyprus
The establishment of a Cypriot AIF must be completed by registering a legal form under which the fund will operate. Under the new legislation, such a fund can take any of the following legal structures:
- – common fund which can be used for setting up AIFs with unlimited number of members;
- – company with a fixed or variable share capital which can be used for both types of AIFs;
- – investment limited partnership which is also available for the creation of both types of AIFs.
Considering that Cyprus has adopted the AIFM Directive, such a fund can be self-managed when operating under a corporate legal entity, such as a company with a fixed or variable capital, or can appoint a manager when established as common fund or partnership.
Should you want to open an alternative investment fund in Cyprus, our local agents can help you register the desired business form you want to operate it under.
Alternative investment funds with an unlimited number of participants
The Cyprus AIF with an unlimited number of investors has several advantages, among which:
- can be marketed to all types of investors, including retail ones;
- must have a custodian who can be a bank located in Cyprus, an EU country, or a third-country state, however, certain conditions apply to the last option;
- it can be setup as an umbrella fund with multiple sub-units;
- within 12 months from creation, it must gather a capital of 500,000 euros from investors, however, the period can be extended for another year;
- self-managed funds must have a minimum share capital of 125,000 euros.
Also, such an AIF can be listed on the Cyprus Stock Exchange, as well as on other exchanges.
If you want to open an alternative investment fund in Cyprus, the fund with unlimited number of participants offers a lot of flexibility.
The AIF with limited number of participants in Cyprus
Compared to the other type of investment fund, the AIF with a limited number of investors is subject to a few more restrictions and more requirements. Among these:
- – it can only be marketed to professional investors;
- – the maximum number of participants is 50;
- – a participant must invest at least 125,000 euros in the fund.
On the other hand, it can benefit from more relaxed regulations when it comes to the appointment of a custodian. It is not required to appoint one if:
- – its assets are valued at less than 500,000 euros;
- – it has a maximum number of 5 investors or;
- – the assets entrusted to the custodian are maximum 10% of its total assets, it has maximum number of 25 investor, each with a contribution of 500,000 euros.
The AIF must raise a capital of 250,000 euros within 12 months from creation.
Foreign investors who want to open companies in Cyprus can also rely on our local representatives.
AIFs on the Cypriot market
When first enabled, the new AIF law also attracted many investors who created 126 such funds. Out of these, 55% were private equity funds, while 20% were real estate funds, and the remaining 25% operated other types of assets.
If you want to open an alternative investment fund in Cyprus and need support, contact our company registration experts.