AIFs in Cyprus

Cyprus’ investment fund sector builds its success largely on its regime for Alternative Investment Funds (AIFs). Assets under management (AUM) of AIFs in Cyprus reached €10.7 billion in the first half of 2021, accounting for around 95% of Cyprus’ total AUM.

A key attraction of Cyprus’ AIFs is the broad range of assets they can invest in. Amongst others, AIFs established in Cyprus are structured as private equity, bond, real estate, hedge and multi asset funds. These asset classes are traditionally not found in UCITS funds, which mostly focus on investing in stocks and bond markets.

Cyprus offers three different types of AIFs, including the Registered Alternative Investment Fund (RAIF), an indirectly regulated fund product, which allows fund promoters gain speed-to-market advantages.

Table of Contents

AIFs: Key Facts

Types of AIFs

  1. Alternative Investment Fund with Unlimited Number of Persons
  2. Alternative Investment Fund with Limited Number of Persons
  3. Registered Alternative Investment Funds (RAIFs)

Legal Forms

Investor Categories

Key Benefits of Cyprus AIFs

Taxation of AIFs in Cyprus

Management and Administration of AIFs

AIFs in Cyprus: Questions and Answers

AIFs: Key Facts

Cyprus regulatory framework for Alternative Investment Funds is fully aligned with the relevant EU Directives in this field. AIFs that are established under Cyprus’ fund legislation can be sold on a private placement basis or marketed to professional investors across the EU under the Alternative Investment Fund Managers Directive (AIFMD) passport.

Fund managers praise Cyprus’ AIFs for their flexibility and cost effectiveness. There are no investment restrictions, and compared with other EU jurisdictions, the set-up and maintenance costs for a Cyprus AIF are relatively low.

AIFs can be established in the following legal forms: Common Fund (CF), Variable Capital Investment Company (VCIC), Fixed Capital Investment Company (FCIC), or Limited Partnership (LP). They can be marketed to different investor categories, including professional and/or well-informed investors, or retail investors.

Types of AIFs

There are three different types of AIFs in Cyprus: Alternative Investment Funds with Unlimited Number of Persons, Alternative Investment Funds with Limited Number of Persons and Registered Alternative Investment Funds.

Alternative Investment Fund with Unlimited Number of Persons

Alternative Investment Funds with Unlimited Number of Persons (AIFUNP) have the following features:

  • May be marketed to retail, or well-informed and/or professional investors
  • Freely transferable investor shares
  • Must appoint a Depositary
  • Can be listed on a recognised stock exchange, and AIFs marketed to retail investors can be traded
  • Minimum share capital requirements of €125,000 (in case of self-managed funds, it is €300,000)
  • May be internally managed
  • May be subject to certain investment restrictions depending on the investor type and the overall investment policy. AIFs addressed to well-informed and professional investors are not subject to investment restrictions, except Loan Origination Funds, Money Market Funds, Venture Capital Funds and Funds of Funds

Alternative Investment Fund with Limited Number of Persons

Alternative Investment Funds with Limited Number of Persons (AIFLNP) have the following characteristics:

  • Must be marketed only to professional and well-informed investors
  • Maximum number of investors cannot exceed 50
  • freely transferable investor shares, with the condition that their transfer does not result in the AIF having more than 50 investors
  • May not be required to appoint a depositary in certain circumstances such as when its total assets do not exceed €5 million (or currency equivalent), including any investment compartments thereof, or its instruments of incorporation limit the number of its unitholders (including any investment compartments thereof) to 5 persons for the duration of the life of the AIF, or 90% of the assets are not subject to custody and the number of investors are limited to 25 and provided each investor subscribes a minimum of €500,000
  • May be internally managed
  • Assets under management do not exceed the AIFMD thresholds of €100 million (including leverage) or €500 million (without leverage, five-year lock-up period for investors)
  • Minimum share capital requirement of €50,000 for internally managed funds

Registered Alternative Investment Funds (RAIFs)

Registered AIFs (RAIFs) do not require authorisation by the Cyprus Securities and Exchange Commission (CySEC) in order to commence operations as long as they are externally managed by an Alternative Investment Fund Manager (AIFM) established in Cyprus or in another EU Member State. This means RAIFs are the vehicle of choice for all those requiring a quick and cost-effective fund launch. RAIFs have the following features:

  • Can be marketed only to professional or well-informed investors
  • Available to an unlimited number of investors
  • Must be externally managed by an external manager
  • No restrictions on its investment strategy, but a RAIF cannot be set up as a Money Market Fund. The establishment of RAIFs as Loan Origination Funds will be permitted subject to certain conditions upon the approval of a relevant amendment in the legislation, which is expected to take place end of 2021/beginning of 2022
  • RAIFs will have to raise capital of at least €500,000 during their first 12 months of operations
  • Can be set up as umbrella funds which have separate compartments treated as a separate legal entity.
  • Must appoint a local depositary

Third-country AIFMs will be able to submit a request for registration of an AIF, once the country where these have been established has granted passporting rights pursuant to the AIFMD.

RAIFs can be organised in any legal form available under Cyprus Law (investment company, limited partnership and common fund), and can be open or closed-ended and be established with multiple compartments.

An AIF can be set-up in one of the following legal forms:

  • Fixed Capital Investment Company (FCIC): A limited liability company with a fixed capital.
  • Variable Capital Investment Company (VCIC): A limited liability company with variable capital. Most AIFs use this legal form in Cyprus as its share capital can be increased or decreased depending on the number of investors that buy in or sell their investments in the fund.
  • Common Funds: Only AIFUNPs and RAIFs can use this structure. Common funds are based upon contractual law rather than being enacted through a corporation or partnership.
  • Limited Partnership (LP): It may or may not have a separate legal personality.

Investor Categories

AIFs can be marketed to retail, professional and well-informed investors.

An investor is considered a professional investor if he or she has the experience, knowledge and expertise to make investment decisions and is able to properly assess related risks.

Well-informed Investors are not considered professional investors but have confirmed in writing that they are aware of the nature of their investment operations and accept the related risks. In addition, they need to invest at least €125,000 in an AIF or be successfully assessed by a bank, investment firm or UCIT management company as a well-informed investor with the required level of expertise and knowledge.

Investors who neither qualify as professional nor as well-informed investors are retail investors.

Key Benefits of Cyprus AIFs

  • Cost-efficient and simple to set-up, manage and operate
  • Modern regulatory framework fully in line with relevant EU directives
  • Increased flexibility as a number of asset classes can be included in an AIF investment strategy
  • Significant tax incentives offered by the country’s advantageous tax framework
  • Full transparency through annual audited reports to CySEC and investors, which include financial statements, borrowing information, portfolio information and Net Asset Value
  • Supervised by a competent and accessible regulatory authority

Taxation of AIFs in Cyprus

Setting up an AIF in Cyprus can have significant advantages from a tax perspective as most dividend income and capital gains of a fund established and domiciled in Cyprus is tax-free. In addition, AIFs set up on Cyprus have access to a wide network of double tax treaties. Find out more about the key tax provisions in our guide on the taxation of funds in Cyprus.

Management and Administration of AIFs

Fund Manager

The EU Alternative Investment Fund Managers Directive regulates the setting up and operation of Alternative Investments Fund Managers (AIFM), which form part of the Alternative Investment Funds (AIF) category. The Cyprus Securities and Exchange Commission (CySEC) is regulating AIFMs. More information on management company platforms and investment management services can be found in the sections on fund hosting and passporting.

Mini Manager

Cyprus’ mini fund manager law allows for the licensing of sub-threshold alternative investment fund managers. A Mini Manager can manage:

  • AIFs with limited or unlimited number of persons
  • Registered AIFs taking the form of a Limited Partnership
  • Non-Cypriot AIFs (subject to the discretion of competent authorities in the other jurisdiction)

The total assets under management of the Mini Manager cannot exceed the threshold of €100 million, with the use of leverage, or €500 million when unleveraged with a lock up of five years.

This regime traditionally appeals to fund managers who need a cost-effective vehicle that undertakes limited investment or to fund managers who may wish to use it as a first step before committing to a more complex set-up.

Fund Administration

Fund managers can outsource the administration of the fund. Fund administrators handle the day-to-day operations of the fund and perform general administrative tasks, such as redemptions and withdrawals, computing Net Asset Values, maintaining books and records, and disbursing payments. The administrator must be suitably qualified and should also be resident of Cyprus for tax residency purposes.

AIFs in Cyprus: Questions and Answers

What are the key differences between UCITS and AIFs?


  • Usually a good product for retail investors with small investments
  • Many investment restrictions are in place in order to protect investors
  • Investments are only possible in liquid assets such as shares, debt and bonds
  • A UCITS can only be set up as a Mutual Fund or a Variable Capital Investment Company
  • EU cross-border distribution due to the UCITS Product Passport


  • The product of choice for investors with higher investments, including institutional investors
  • Very little investment restrictions
  • A wide choice of asset classes to invest in
  • An AIF in Cyprus can be established as a Variable Capital Investment Company (VCIC), Fixed Capital Investment Company (FCIC), Limited Partnership (LP) or a Common Fund (CF)
  • EU cross-border distribution on the basis of the AIFMD Product Passport

Are AIFs registered in Cyprus safe?

Every investment carries a risk. In general, AIFs are riskier than the standard UCITS funds, which are offered to retail investors. Targeting primarily well-informed and professional investors, the assumption is that investors in AIFs are aware of the associated risks. Nonetheless, Cyprus’ legal and regulatory framework for AIFs is fully aligned with the latest EU directives on asset management, transparency and investor protection.

Are RAIFs really unlicensed funds?

A RAIF is not licensed by CySEC but is indirectly regulated through its manager who should always be a licensed AIFM. RAIFs are however listed in a special register.

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