Fund
administration

Cyprus is in the front-line when it comes to business-friendly environment for fund management and administration in the European Union.

Alternative Investment Funds (AIFs) offer notable advantages for end-investors:

  • Fairly simple and quick application process (up to 3 months)
  • Easy and cost efficient to set up and maintain Cyprus AIF funds
  • Any asset can be included in the investment strategy of the AIF (under certain conditions)
  • An AIF can be set-up as an “umbrella fund” with multiple investment compartments, allowing the management company to utilize tailor-made investment strategies with different categories of assets
  • The investment compartments have no initial share capital (for corporate form AIFs)
  • Mandatory publication of annual and half yearly financial reports to the CySEC and investors (financial statements, portfolio composition, borrowing, NAV etc.)
  • Annual audited financial reports
  • Calculation of Net Asset Value (NAV) at least annually or after receiving redemption application forms
  • Exemption from tax on the amount invested to the AIF, as well as on the capital gains from the disposal of units/shares of the AIF
  • Exemption from tax on profits earned by the AIF from sale of shares or other instruments, as well as from dividends received by companies in which the AIF has invested
  • Flat corporate tax (12,5%) on annual net profits for AIFs of corporate form

AIF Legal Forms

An Alternative Investment Fund (AIF) may be set up in one of the following legal forms :

(a) as a mutual fund

(b) as an investment company in the legal form of a limited liability company with shares

(c) as a limited liability partnership

Also, an AIF may consist of more than one investment compartment. Each investment compartment of the AIF may issue units which correspond to the assets of the specific compartment. The value of the units may vary among investment compartments.

AIF Types

Alternative Investment Funds (AIFs) are established in two main types :

(Ι) AIF with limited number of persons (AIFLNP)

(ΙΙ) AIF with unlimited number of persons (AIF)

Characteristics of AIFs with limited number of persons (AIFLNP)

  • May be marketed only to well-informed and/or professional investors
  • Cannot exceed total number of 75 investors/unit holders
  • Freely transferable investor units/shares of the AIFLNP, with the condition that this transfer does not result in the fund having more than 75 investors/unit holders
  • In certain cases may not be required to appoint a licensed manager or a custodian
  • An AIFLNP can be established either as a fixed or variable capital company or as a limited partnership
  • An AIFLNP can be formed with multiple investment compartments
  • AIFLNP are not subject to minimum capital requirements

Characteristics of AIFs with unlimited number of persons (AIF)

  • May be marketed to retail, or well-informed and/or professional investors
  • Freely transferable investor units/shares of the AIF
  • Must appoint a custodian
  • Can be listed on a recognized stock exchange, and AIFs marketed to retail investors can be traded
  • Subject to minimum capital requirements of €125.000 or €300.000 if it is a self-managed fund
  • May be subject to certain investment restrictions depending on the investor type and the overall investment policy
  • An AIF can be established either as a fixed or variable capital company or as a limited partnership or as a mutual fund
  • An AIF can be formed with multiple investment compartments