Cyprus Unregulated Funds (Registered Alternative Investment Funds, “RAIF”)

Shanda Consult Ltd, July 25, 2018

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 will not be regulated by the Cyprus Security and Exchange Commission (CySEC).

The new Law regulating Alternative Investment Funds, which will replace the current Law 131(I)/2014 regulating the Alternative Investment Funds, will become applicable within a few weeks, once published at the Official Gazette. Once the Law is published in its final version, we will provide more detailed information here.

Cyprus legislation provides for unregulated funds, called Registered Alternative Investment Fund (RAIF)

The new Cyprus Law regulating the Alternative Investment Funds now provides for unregulated alternative investment funds, called “Registered Alternative Investment Fund”, or shortly RAIF.
The new law aims to provide a more cost-effective fund vehicle and to reduce drastically the time until a fund can start offering investment opportunities.
There has been an increasing demand for an unregulated alternative investment fund in Cyprus coming from China, the Middle East and EU countries.

An unregulated Cyprus Registered Alternative Investment Fund (RAIF) provides the following advantages:

• a Registered Alternative Investment Fund (RAIF) in Cyprus does not need to be authorised and licenced by the Cyprus Security and Exchange Commission (CySEC);
• a Registered Alternative Investment Fund (RAIF) in Cyprus will not be regulated by the Cyprus Security and Exchange Commission (CySEC);
• there are no minimum capital requirements for a Registered Alternative Investment Fund (RAIF);
• a Registered Alternative Investment Fund (RAIF) may be structured either as common fund, an investment company with variable or fixed capital or as a limited partnership;
• a Registered Alternative Investment Fund (RAIF) may be open-ended or closed-ended;
• a Registered Alternative Investment Fund (RAIF) is allowed to be set up as an umbrella fund, allowing the setup of multiple investment compartments (“sub-funds”);
• there are no investment restrictions for a Registered Alternative Investment Fund (RAIF), with the exception that RAIFs cannot set up as Funds of Funds, Money Market Funds or Loan Origination Funds;
• a Registered Alternative Investment Fund (RAIF) may have an unlimited number of investors;
• there is no limitation for the assets under management of Registered Alternative Investment Fund (RAIF).

The new Registered Alternative Investment Fund (RAIF) in Cyprus will drastically ease the procedures to set up a fund by eliminating the need for lengthy authorisation and licencing procedures by CySEC; licencing costs will be reduced substantially.

The following conditions apply for the setup of an unregulated Registered Alternative Investment Fund (RAIF) in Cyprus:

• a Cyprus Registered Alternative Investment Fund (RAIF) must be managed by an Alternative Investment Fund Manager (AIFM), which may be licenced in Cyprus or any other EU member state and is obliged to supervise an RAIF;
• alternatively, to the above, an Alternative Investment Fund Manager (AIFM) may be managed by a UCIT Manager licensed in the EU or a Cyprus Investment Firm (CIF), if the Cyprus RAIF is set up as a partnership and if the RAIF invests minimum 70% of its funds in illiquid assets (real estate property, ships, planes etc.) and if the RAIF is closed-ended;
• in near future, a Registered Alternative Investment Fund (RAIF) may also be managed by a “Mini Fund Manager”, for which the respective legislation is expected very soon;
• a Registered Alternative Investment Fund (RAIF) must appoint a local Depository, which may be a financial institution in Cyprus or a Cyprus Investment Firm (CIF);
• with the consent and under the supervision of the local Depositary, bank accounts may be maintained anywhere in the world;
• CySEC must only be notified about the setup of a Registered Alternative Investment Fund (RAIF); CySEC will maintain a special register for RAIFs; once CySEC confirmed that an RAIF has been included in the special register, an RAIF may start to operate;
• a Registered Alternative Investment Fund (RAIF) may only address well-informed and/or professional investors.

Please feel free to contact us for further information, or if you wish to set up a Registered Alternative Investment Fund in Cyprus, through the contact form below. We will be happy to advise and to assist.


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