UCITS (Undertakings for Collective Investment in Transferable Securities) is an undertaking of which the objective is the collective investment in transferable securities from funds raised from the public, the issue of units reflecting these investments and their repurchase and redemption out of the assets of the UCITS. At least 90% of the investment portfolio of a UCITS must consist of listed securities or recently listed transferable securities.
The legislation of 200(I)/2004, as amended, transposes the provisions of the UCITS IV Directive, which regulates the registration, and marketing of open ended local and foreign funds in Cyprus. Under this legislation two legal forms of open ended funds can be created, mutual funds and variable capital investment companies (VCIC). Both are regulated by the Cyprus Securities and Exchange Commission (CySEC).
Main provisions for the UCITS Fund
- The fund can take the form of a mutual fund or variable capital investment companies (VCIC)
- The minimum capital for a new fund is:
- €125,000 if Management company’s sole purpose is management of UCITS
- €200,000 if UCITS appoints an external manager (per sub fund if applicable)
- €300,000 if UCITS is a self Managed VCIC (per sub fund if applicable)
- The fund needs a custodian which should be a local institution (usually a bank).
- Both the Mutual Fund and the Variable Capital Investment Company may be set up as a single fund or as an umbrella fund consisting of multiple compartments, each with a different investment policy and different share classes, depending on the needs of the investors to whom the fund is distributed.
Note that as per a UCITS IV Directive, it is possible to form funds in Cyprus and manage them from an approved institution outside Cyprus (in another EU country). Additionally existing cross border marketing provisions are now simplified to a regulator to regulator notification which permits a UCITS to be marketed in another member state within 10 days after the receipt of the notification letter with key investor information, in order to be able to assess the risks associated with the specific UCITS.
UCITS IV and AIFMD
The passporting regime of management companies across the EU applies to UCITS managers only and not to management companies of other types of funds such as the AIF’s. So UCITS managers, which also manage non UCITS local funds, will have no passport under the UCITS IV Directive for the non UCITS part of their activity. This is where the AIFMD steps in and provides the passport for the non UCITS activities making it possible to consolidate management remotely; at least in certain instances (the AIFMD (non UCITS) passport is only available for sales to professional investors).