AIFs, RAIFs & AIFMs in Cyprus
In recent years, Cyprus has introduced attractive legislation and regulations for investment funds and investment fund management which has significantly enhanced its position as a cost-effective and flexible jurisdiction for funds and fund managers.
With its common law jurisdiction and comprehensive tax treaty network, we believe that Cyprus can become a regional fund centre and a cost-effective investment platform in the EU zone. The jurisdiction also offers fund managers and fund promoters cost-effective and substance solutions to meet the demanding legal and regulatory dynamics of the EU fund industry. With UK out of the market due to Brexit, Cyprus has emerged as a fast growing jurisdiction for fund management companies who want to operate across borders within the EU, gradually getting market share from established centres such as Ireland and Luxembourg.
The concept of a 'Registered Alternative Investment Fund' (aka RAIF) was introduced in 2021 and it has generated a lot of interest from domestic and international players in this sector. With the growth of RAIFs based in Cyprus, there is also increased demand for Alternative Investment Fund Managers (AIFM) that are required to manage a RAIF.
While setting up a proprietary AIFM does have advantages, it is not a requirement, so many AIFs and RAIFs, use services of third party AIFMs. These independent fund management companies offer a turnkey solution which reduces time to launch and operating costs.
Traditionally, self-managed investment funds had a Board of Directors legally responsible for all functions but in practice outsourcing most functions through contractual arrangements. However, this arrangement is now being reviewed by many funds, due to the increase in substance requirements and the time by Directors to supervise operations and comply with more and more regulations.
Institutional investors are increasingly using services of third party AIFMs who are responsible, inter alia, for the operations and oversight of the Fund including risk management, AML compliance and other regulations. This model of setup and operation also fits in with the broader industry theme of increasing regulatory and taxation pressures and the OECD BEP recommendations which require substantive Fund Management activities to be conducted in the same location where profit is derived with the goal of combatting tax avoidance. This model also satisfies the FATF’s focus on AML which requires increased local oversight of AML/KYC functions in the jurisdiction of the Fund.
Relikor together with legal experts and licensed associates can offer clients a full range of services to set-up, operate, and govern the above regulated entities.