Alternative Investment Funds (AIF)

AIF

Short Description

Alternative Investment Funds (AIFs), established according to the regulatory framework of the Cyprus Republic, means any collective investment undertaking, including investment compartments, which, collectively:

(a) raises capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors; and

(b) has not received authorization pursuant to section 9 of the Open-ended Undertakings for Collective Investments Law or pursuant to the legislation of another Member State which harmonizes the article 5 of the Directive 2009/65/EC

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What are the advantages , the legal forms and types of AIF?

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

Fairly simple and quick application process
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

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

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.

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 50 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 50 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