Establishing an Alternative Investment Fund in Cyprus in 2025
An Alternative Investment Fund (AIF) refers to a collective investment structure—often comprising various investment compartments—that pools capital from investors and allocates it based on a predefined investment strategy, aiming to generate returns for the benefit of those investors. In Cyprus, the establishment of any AIF is subject to prior approval by the Cyprus Securities and Exchange Commission (CySEC), the independent regulatory authority overseeing financial markets in the Republic.
In this article the SALVUS Investment Funds Licensing team, shares valuable insights on Alternative Investment Funds under CySEC, by discussing:
1. Legal framework
2. Which are the AIF types and features?
3. Alternative Investment Fund Managers (AIFM)
4. AIF Organisation and Operation Regulatory Requirements
5. How SALVUS can support your AIF authorisation
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1. Legal framework
The legal framework governing the licensing and operation of AIF entities in Cyprus is primarily outlined in the Alternative Investment Funds Law of July 2018. This legislation marked a substantial upgrade from the 2014 AIF Law, introducing enhanced authorisation procedures, stricter transparency and supervisory requirements, clearer rules for ongoing operations, more flexible investment structuring options, and increased responsibilities for directors, external managers, and depositaries.
Notably, the 2018 Law also introduced the Registered Alternative Investment Fund (RAIF), a fund model designed to address market demands by offering a more efficient and cost-effective structure that avoids the lengthy and costly direct authorisation process by CySEC.
2. Which are the AIF types and their features?
In the table below we provide the key features of an AIF, indicating the different requirements for each of the following AIF types:
- AIF with an unlimited number of persons (AIF)
- AIF with a limited number of persons (AIFLNP)
- Registered AIF (RAIF)
| Feature | AIF | AIFLNP | RAIF |
|---|---|---|---|
| Legal Form | – Common fund, – Investment company (Variable or Fixed Capital), – Limited Partnership. | – Investment company (Variable or Fixed Capital), – Limited Partnership. | – Common fund, – Investment company (Variable or Fixed Capital), – Limited Partnership. |
| Eligible Investors | – Professional, – Well-informed, – Retail. | – Professional, – Well-informed. | – Professional, – Well-informed. |
| Number of Investors | Unlimited | Up to 50 investors (applies for all compartments) | Unlimited |
| Min AUM within the first 12 months | EUR 500,000 | EUR 250,000 | EUR 500,000 |
| Fund Management | – Self-managed (in the case of an investment company or a limited partnership with separate legal personality), – Externally Managed by a fund manager. | – Self-managed (in the case of an investment company or a limited partnership with separate legal personality), – Externally Managed by a fund manager. | Always externally managed |
| Min Capital requirement | If self-managed: EUR 125,000 | If self-managed: EUR 50,000 | Not subject to minimum capital requirements. |
| Assets Under Management | – No restriction if AIFM is appointed. – If AIFM is not appointed then: AIF can hold assets under the threshold of; 1. EUR 100 Million including assets acquired through leverage, or 2. EUR 500 Million where no leverage is employed and the unitholders have no redemption rights for 5 years | – No restriction if AIFM is appointed. – If AIFM is not appointed then: AIF can hold assets under the threshold of; 1. EUR 100 Million including assets acquired through leverage, or 2. EUR 500 Million where no leverage is employed and the unitholders have no redemption rights for 5 years | No restrictions |
| Depositary | Mandatory appointment | Mandatory appointment (An exception not to appoint a depositary is permitted upon certain conditions.) | Mandatory appointment |
| Authorisation timeframe | 6 months | 6 months | 1 month |
If you have additional questions regarding AIF authorisation, feel free to contact us at info@salvusfunds.com to discuss your investment fund needs.
3. Alternative Investment Fund Managers (AIFM)
An AIF unless structured as self-managed, must appoint an AIFM, to oversee its external management. The AIFM may either be an external manager, designated by the AIF to assume full responsibility for its overall management, or the AIF may opt to be internally managed, effectively acting as its own AIFM.
In the latter case, this is permissible only if the AIF is established as a Variable Capital Investment Company (VCIC) and its assets remain below specific thresholds:
- under €100 million if leverage is employed, or
- under €500 million if there is no leverage and investors have no redemption rights for at least five years.
Should the AIF exceed these limits, it must comply with the Alternative Investment Fund Managers Law and operate as a licensed AIFM.
Imperative is the fact that the AIFM engages in the core investment functions of portfolio and risk management when managing an AIF.
4. AIF Organisation and Operation Regulatory Requirements
Irrespective of the AIF type or being externally or internally managed, the applicable legislation prescribes common provisions regarding the organisation and operation of an AIF. More specifically:
- Minimum asset retention; raising a minimum capital within the first 12 months, excluding capital commitments, applicable for each compartment in an umbrella AIF.
- Investment policy; establishing a policy, detailing investment restrictions on asset types and investor categories.
- Risk Management; implementing risk identification and monitoring systems, maintaining due diligence procedures, setting maximum leverage levels and reuse rights.
- Conflicts of interest; applying arrangements to prevent and manage conflicts.
- Liquidity management; using a system to monitor and ensure the AIF’s liquidity aligns with its investment and redemption policies.
- Remuneration policies; promoting risk management and discouraging risk-taking inconsistent with the AIF’s profile.
- Asset valuation; ensuring independent asset valuation and net asset value calculation as per legislation or fund rules.
- Qualified management; assuring that business conduct is managed by reputable and experienced individuals.
- Transaction execution; transactions by related parties (external managers, directors, depositaries, advisors, unitholders, or closely linked individuals) must comply with fund rules or incorporation instruments.
5. How SALVUS can support your AIF authorisation
The SALVUS industry-leading Investment Funds Licensing team with specialised expertise in the authorisation and registration of Investment Funds stands ready to support you in selecting the most appropriate type and structure of investment fund based on your business needs and objectives.
Due to our sophisticated project management approach, we work in coordination with your team in collecting and preparing the necessary documentation for submitting a complete application to the regulator, ensuring prompt correspondence. Furthermore, we provide guidance and assistance in order to fulfill your post-authorisation regulatory obligations.
If you have additional questions regarding AIF authorisation, feel free to contact us at info@salvusfunds.com to discuss your investment fund needs.
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The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.