Cyprus Alternative Investment Fund Managers


Alternative Investment Fund Managers (AIFM) and Alternative Investment Funds (AIF) are governed by the ‘Alternative Investment Fund Managers Law of 2013’, harmonizing Cyprus legislation with EU Directive 2011/61/EC of the European Parliament and of the Council. The Law and relevant Directives aim to provide for an internal market for AIFs and a harmonized regulatory and supervisory framework. Moreover, the adoption of the said Law is predicted to cause the relocation of a significant number of Alternative Investment Funds and their managers to cost efficient EU jurisdictions with an attractive legislative, regulatory and tax framework to host their operations.

Some of the key advantages to AIFMs and AIFs operating from Cyprus include Passporting with all applicable EU Directives and the low tax burdens levied on Cyprus-based corporations. Non-Cypriot investors can also benefit from an extensive double-taxation treaty network in place in Cyprus.

Determining applicability of the AIFM Law

The entities whose AuM do not exceed EUR 100.000.000 (or EUR 500.000.000 unleveraged) may benefit from a lighter regime. Such AIFMs are subject to registration and not authorization. They have to provide to the relevant authority with information on their identities and the identities of the AIFs they manage. Further, the investment strategies they pursue through their AIFs, the main instruments, in which they are trading as well as the main exposures and most important concentrations they have.

Roadmap to implementation

The timelines for implementation are as follows:

  • EU AIFMs managing EU AIFs must apply for a license by 22 July 2014
  • Non-EU AIFMs managing EU AIFs must apply for a license by 22 July 2015 (even if not marketing in the EU)
  • Non-EU AIFMs managing non-EU AIFs can apply for a license as of 22 July 2015 or opt-out by not marketing in the EU. In the interim, they can continue to be marketed on the basis of local private placement rules
  • Ultimately any AIFM intending to market in the EU needs to become authorized by 22 July 2018

Continuing Obligations

  • Minimum capital is €125,00 for an external AIFM with an additional amount of 0,02% of the value of the portfolio in excess of €250 million (capped at €10m)
  • Remuneration policies should discourage risk taking
  • Risk management system must be hierarchically separated from the operating units
  • Leverage must be set
  • Liquidity management system to monitor risk and ensure compliance with set obligations
  • Valuation procedures to ensure proper and independent valuation
  • Independent depositary must be appointed
  • Delegation is permitted for some functions as long as the AIFM does not become a ‘letter-box’ entity
  • Reporting obligations

Authorization Requirements

The application procedure requires filing information on the AIFM as well as the AIF it intends to manage to the regulator of the home Member State of the AIFM. The application file includes, inter alia, information on:

  • the directors and senior managers
  • the qualifying shareholders
  • program of activity
  • organizational structure
  • remuneration policies
  • delegation arrangements

The time required to obtain the authorization, is within three months, however, this period can be extended in specific cases. Upon authorization, the AIFM license will be valid across all Members States and ESMA will keep a central register identifying each authorized AIFM.

For further information please do not hesitate to contact our office directly.