Fund Services
Services we provide
With a deep understanding of the regulatory framework , our professionals work closely with clients to understand their strategy and goals This approach allows us to develop clear and innovative solutions to deal with the challenges they face and help them to evolve and prosper in a changing environment. We work with you from pre application to license to launch , through the full lifecycle of your investment vehicles, administering the most complex funds.
Your funds are structurally and operationally unique, so we tailor our service plan to your specific needs. We act as the co-ordinating party between the principals of the structure and all the professionals involved. As their trusted service partner, we work with our clients to administer their funds effectively. We provide expert advice and a wide range of services on the appropriate fund vehicle that will meet your requirements while at the same time ensuring it will deliver on your Financial and Tax goals. All of the above makes us suitable to provide our clients an "all -in-one service" saving you time and cost.
- Investment Funds registration licensing
- Fund Administration Services
- Other services: Depositary services, Fund Management, Risk, Compliance etc.
- Prepare and advice on the content of the application to the Cyprus Securities and Exchange Commission, including monitoring thereafter
- Provide fund administrative services
- accounting and bookkeeping
- reporting to the Cyprus Securities & Exchange Commission
- Arrange the provision of external parties services i.e. custody, audit, brokers, banks
Types of Funds
The AIF Law allows for three types of AIFs to be established in Cyprus.
Alternative investment fund (AIF) set up criteria
Alternative Investment Fund Managers (AIFMs)
An AIFM is defined as an entity that provides, at a minimum, portfolio management and risk management services to one or more AIFs as its regular business irrespective of where the AIFs are located or what legal form the AIFM takes. The AIFM can either be an external manager appointed by or on behalf of the AIF, or the AIF itself (any delegate managing assets should not therefore be an AIFM).
Why Cyprus
The implementation of the EU regulatory framework of the UCITS IV Directive and the Alternative Investment Fund Managers Directive (“AIFMD”) is drastically changing the fund industry both within and outside the EU. The Prospectus Directive and the Markets in Financial Instruments Directive (MiFID) , both transposed into Cyprus national legislation, provide issuers with a single EU passport for prospectuses and managers to promote their services in all EU member states. Fund managers, custodians, administrators and promoters seeking to raise funds and maximize returns for their clients must choose a jurisdiction to domicile (or transfer) their fund and/or their own operations taking into account the requirements of the new European Directives as well as their regulatory, tax and cost implications. Here is where Cyprus comes in as the new, cost efficient, low EU tax member state with great infrastructure, a cosmopolitan way of life and well educated work force, offering to fund managers an attractive place either to relocate or register their fund and manage it from another member state as per the MiFID. Cyprus can offer the same EU advantages at a fraction of the cost of its counterparts in Luxembourg, Ireland and the UK. The local presence of hedge fund managers is growing and funds such as IKOS and Albourne Partners bear testimony to a trend that industry experts predict is set to rise: Cyprus as a preferred jurisdiction for fund domicile and fund management.
Frequently Asked Questions
The UCITS (Undertakings for Collective Investment in Transferable Securities) legislation regulates funds that can be offered to the public at large. These funds can be sold across the EU subject to a notification procedure with each country regulator.
Alternative Investment Funds (AIFs) or Non UCITS (as per meaning of UCITS IV Directive) fall under the AIFMD (Alternative Investment Funds Directive) and under The AIF Law 124(I)/2018, has amongst others, introduced the possibility to create Registered AIFs in Cyprus. Examples of such funds are Hedge Funds, Commodities Funds, Funds of Funds, Real Estate Funds etc.
The term ‘alternative investment fund’ or ‘AIF’ or a Non UCITS Fund refers to any vehicle established for the purpose of raising capital from a number of different investors with an aim to invest these funds into mostly non listed assets to generate favourable returns.
Examples of such funds are Hedge Funds, Private Equity, Venture Capital, Commodities Funds, Funds of Funds, Real Estate Funds etc.
The AIF Law allows for three types of AIFs to be established in Cyprus which are as follows:
- Alternative Investment Funds with Limited Number of Persons (Up to 50) (AIF-LNPs)
- Alternative Investment Funds with Unlimited Number of Persons (AIFs)
- Registered AIFs (RAIFs)
Cyprus Alternative Investment Funds with a Limited Number of Persons (AIFLNP), are restricted in the maximum number of unit holders to 50, and they may only be marketed to professional and/or well-informed investors. The maximum portfolio of assets managed is EUR 500 million if unleveraged or EUR 100 million if leveraged.
In return, AIFLNPs are less regulated and do not require a minimum paid-up capital.
Click here to find more about AIF-LNP.
- Flexible Investment Strategy
This type of fund does not fall under the stringent regulations of UCITS public funds and therefore can implement any investment strategy the promoters decide to. For example, it can be set up as Equity Fund, Bond Fund, Hedge Fund, Property Fund, or a fund with general investment policy that can invest in several of the above (Allocation Funds).
- Light Regulation
The fund is private, and thus enjoys light regulation and supervision compared to a public fund, or any other similar entities in other jurisdictions.
- Low operational costs
-Compared to other jurisdictions, costs such as administration, custodian fees, audit, legal services, accounting and other, are considerably less in Cyprus (30-50% lower).
-No fully fledged offices needed (virtual-no staff)
- Less reporting obligations
Annual and semi-annual reports, monthly asset holdings statements, Borrowings and NAV only must be submitted to the regulator.
- Favourable taxation regime
Since the AIFLNP or RAIF is a Cyprus resident company, it will enjoy all the low tax benefits and double tax treaties of the Cyprus system.
- Low Set Up Cost and Quick Time to Market
Compared to the set-up cost in other jurisdictions a RAIF can be set up at comparatively low fee and be operational in a very short time (between 2 to 3 months).
The Prospectus Directive and the Markets in Financial Instruments Directive (MiFID), both transposed into Cyprus national legislation, provide issuers with a single EU passport for prospectuses and managers to promote their services in all EU member states.
Fund managers and promoters seeking to raise funds and maximize returns for their clients must choose a jurisdiction to domicile (or transfer) their fund and/or their own operations considering the requirements of the new European Directives as well as their regulatory, tax and cost implications. Here is where Cyprus comes in as the new, cost efficient, low EU tax member state with great infrastructure, a cosmopolitan way of life and well educated work force, offering to fund managers an attractive place either to relocate or register their fund and manage it from another member state as per the MiFID. Cyprus can offer the same EU advantages at a fraction of the cost of its counterparts in Luxembourg, Ireland, and the UK.
The various legal forms in which either type of AIFs can manifest are as follows:
AIF-LNP:
- Variable Capital Investment Company (V.C.I.C)
A private limited liability company registered in Cyprus, with variable capital.
- Fixed Capital Investment Company (F.C.I.C)
A private limited liability company registered in Cyprus, with fixed capital.
- Limited Partnership (L.P)
A limited partnership registered in Cyprus.
AIF/RAIF:
- V.C.I.C
- F.C.I.C
- Common Fund (C.F)
- L.P
Registered Alternative Investment Funds (RAIF) do not require a CySEC license.
The new Cyprus Law regulating Alternative Investment Funds, approved by the parliament on 10 July 2018, provides for so-called Registered Alternative Investment Funds (RAIF), which do not need to be licenced by the Cyprus Security and Exchange Commission (CySEC).
This is considered to be the fastest solution to create a fund as all regulatory issues are transferred to the AIFM (Alternative Investment Fund Manager) that registers it under its license.
UCITS and AIFs are taxed as any other company in Cyprus.
This implies that:
- Profit from disposal of titles (securities) is exempt
- Dividend income is exempt
- Can claim Notional Interest Deduction (NID) on capital injected. * The Notional Interest Deduction is a new powerful tool provided to local and international businesses which enables them to deleverage and realise a tax efficient return on new (qualifying) equity. This return is achieved through the deduction of a “notional” interest expense from their taxable income.
- Interest income is exempt from Special Defence Contribution Tax (SDCT).
- Corporation tax rate of 12.5% on taxable profits.
- No withholding taxes on dividend payment or redemptions.
- No tax based on Assets Under Management.
- No VAT on services provided by the Investment Manager.
- Benefit from a network of Double Tax Treaties with more than 62 countries.
- In case of AIFs with multiple compartments, each compartment is taxed separately, even though each compartment is not considered a separate legal entity.
We have already acted as advisors and directors for several AIFs registered in Cyprus and we can:
- Prepare and advise on the content of the application to the Cyprus Securities and Exchange Commission, including monitoring thereafter.
- Provide fund administrative services
- Accounting and Bookkeeping
- Reporting to the Cyprus Securities & Exchange Commission
- Arrange the provision of external parties’ services i.e., AIFM, custody, audit, brokers, banks.
- Appointment of Non-Executive Directors.
- Secretary Services to the Fund’s legal entity where needed.
- NAV calculation and publication where deemed necessary
- Accounting and bookkeeping
- Maintenance of the Share Registry
- Handling Subscriptions and Redemptions
- Income Distribution to Fund’s Unit Holders
- Liaising with Custodian for all money transfers
- Handling filings with the regulator
- Statutory requirements such as tax and other obligations
Selecting the right structure and legal form of your AIF requires a thorough understanding of your investment objectives, financial and tax goals, and your classification as an investor. Below we provide a summary of our recommendations:
AIF-LNPs: Suitable for High-Net-Worth Investors, Family Offices, Wealth Managers and Real Estate Developers.
AIFs: Investment Managers, Hedge Fund Managers, Private Equity Fund Managers, Discretionary Portfolio Managers and Real Estate Investment Trusts Managers.
RAIFs: Any of the above who need to speed time to market and implement their investment strategy in a short period of time.
It depends on if the AIF is internally or externally managed and whether is uses leverage or not. The following limits apply to all types of AIFs:
Externally Managed: No Limits on the size of the Assets Under Management
Internally Managed:
- With Leverage: Max € 100 Million
- Without Leverage: Max € 500 Million (with 5 years lock-up period)
For more information on our services and how we can assist you, please feel free to contact us at: [email protected]
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