Understand the Cyprus Investment Funds: AIF & RAIF

1. The Collective Investment Undertaking (CIU) Concept

A collective investment involves multiple investors pooling resources to fund a strategy or project. When structured as an Alternative Investment Fund (AIF) or UCITS, it becomes a Collective Investment Undertaking (CIU) and is subject to regulation to ensure proper marketing, investor protection, and oversight. The concept dates back nearly 250 years to the Dutch Republic, where diversification across foreign bonds reduced risk. Today, CIUs exist worldwide in various models, offering different advantages depending on the jurisdiction. In Cyprus, CySEC regulates UCITS, which invest in transferable securities, and AIFs, which have broader flexibility and include subcategories such as AIFLNP and RAIF. 

2. The Regulatory Framework

The regulatory framework for Collective Investment Undertakings (CIUs) differentiates between externally managed funds, which delegate functions to authorized managers, and internally managed funds that handle operations themselves. Oversight is provided through key laws such as the UCITS framework, the Alternative Investment Funds (AIF) Law, the AIFM Law (aligned with the EU’s AIFMD), and the Small AIFM Law, with CySEC acting as the supervisory authority in Cyprus. Recent developments include the Cyprus Fund Administrators Law (2025), which introduced a dedicated licensing regime requiring adequate capital, insurance, local governance, and robust compliance measures to strengthen investor protection and operational standards. 

3. The AIF

Cyprus investment funds are primarily divided into UCITS and Alternative Investment Funds (AIFs), with AIFs offering greater flexibility in asset selection, structure, and strategy while pooling investor capital under a defined policy to generate returns. Unlike the more regulated and retail-focused UCITS, AIFs can adopt diverse investment approaches and be internally or externally managed. 

To operate, AIFs must meet regulatory and governance requirements, including adequate capital, certified officers, oversight mechanisms, and a depositary, and may be marketed to professional, well-informed, or retail investors. Their adaptability and broader investment scope have driven their increasing popularity compared to UCITS.

4. The AIFLNP and RAIF  

An AIFLNP (Alternative Investment Funds with a Limited Number of Persons) limits participation to up to 50 investors and may, under specific conditions such as low asset value or a small number of high-value investors, operate without a depositary. It can be internally or externally managed and structured in various legal forms, including investment companies or limited partnerships. In contrast, a RAIF (Registered Alternative Investment Funds) must always be externally managed, can be marketed to professional and well-informed investors, has no initial capital requirement but must reach €500,000 in net assets within 12 months, and cannot follow certain strategies such as money market or loan origination funds.  

Registration of a RAIF is handled by the external manager, who submits key documents to CySEC; once the regulator confirms that the manager’s license covers the fund’s strategy, the RAIF is entered into the official registry, though registration does not equal authorization. Compared with standard AIFs, both AIFLNPs and RAIFs can operate as umbrella or single schemes but differ in investor limits and depositary requirements.  

5. An Investment Fund Ecosystem

The investment fund ecosystem includes the Board of Directors, which provides governance, and the AML Compliance Officer, who ensures regulatory compliance. The Investment Manager, Fund Administrator, and Distributor handle operations and management, supported by the Management Company, External Auditor, Legal Advisor, and Depositary or Custodian. Licensing requirements and the distinct roles of Depositary versus Custodian ensure the fund operates securely and within legal frameworks. 

6. CySEC Circular C548

CySEC Circular C548, published on 10 February 2023 and addressed to Cyprus Fund Managers, UCITS Management Companies, Alternative Investment Fund Managers, and self-managed UCITS and AIFs, provides guidance on liquidity risk management. Its aim is to enhance investor protection, maintain market integrity, and reduce systemic risk. Management Companies are required to apply high due diligence standards when selecting investments, taking into account key fund characteristics such as investment strategy, liquidity profile, and redemption profile. 

With regard to the above, SALVUS Funds in cooperation with the Institute for Professional Excellence (IforPE), has designed a self-study CPD course titled “Understand the Cyprus Investment Funds: AIF & RAIF“, which introduces the learner to the basic concept around Collective Investment Undertakings (CIU), the CySEC investment fund and fund management regulatory framework, providing an in-depth overview of the characteristics and requirements for AIF, AIFLNP and RAIF, also outlining their difference to UCITS. 

This online self-study program constitutes a comprehensive guide and grants 5 Continuous Professional Development (CPD) units counting towards the annual requirements of CySEC Advanced and Basic certification holders. 

Contact us at compliance@salvusfunds.com if you require support with investment funds regulatory requirements or if you have any questions about our “Understand the Cyprus Investment Funds: AIF & RAIF” course with IfoRPE. 

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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.