A new type of Alternative Investment Funds, the Registered Alternative Investment Funds (the “RAIFs”), has been introduced in Cyprus through the Alternative Investment Funds Law of 2018 which came into force on 31 July 2018 (the “Law”).

What is a RAIF?

  • The introduction of RAIFs is one of the most important and revolutionary developments in the Cyprus fund industry
  • RAIFs are not subject to any licensing requirements but will instead need to simply register with the Cyprus Securities and Exchange Commission (the “CySEC”)
  • The introduction of RAIFS results in a more time-efficient and cost-effective way of establishing an AIF in Cyprus

Requirements for setting up a RAIF

  • It must be externally managed – the RAIF must appoint an Alternative Investment Fund Manager (“AIFM”) which is duly authorised pursuant to the Alternative Investment Fund Managers Law of 2013 (the “AIFM Law”)
  • It is exclusively addressed to professional and/or well-informed investors
  • The constitutional documents or the Internal Procedures Manual, as applicable, of the RAIF must explicitly state that it operates pursuant to Part VIII of the Law
  • A depositary must be appointed pursuant to the provisions of Sections 23-28 of the AIFM Law

AIF Manager

  • The RAIF must appoint an AIFM that is either:

(1) An AIFM of the Republic;

(2) An AIFM of the EU; or

(3) An AIFM outside of the EU, provided it has a passport pursuant to Directive 2001/61/EU    and has indicated a reference country in the EU

  • Deviating from the above, a RAIF which has been formed as a limited partnership can be externally managed by managers other than AIFMs, such as Cyprus Investment Firms or UCITS Management Companies provided that it (i) invests more than 70% of its assets in illiquid investments; and (ii) is formed as a close-ended scheme
  • In the event the RAIF’s manager is an AIFM then the value of the assets under the RAIF’s management must reach a minimum of EURO 500,000 within the first 12 months

CySEC Registration

  • The RAIF must register with the CySEC
  • The AIFM submits an application to the CySEC requesting the RAIF’s registration in the RAIF Register
  • The CySEC completes the assessment of the application within a strict timeframe

Benefits of setting up a RAIF

  • It does not require CySEC authorisation
  • It is subject to becoming registered with CySEC but it does not fall under CySEC’s direct supervision
  • It can be open-ended or closed-ended
  • It can be established as a mutual fund, as an investment firm or as a limited partnership
  • It can operate as an umbrella fund with multiple investment compartments, provided that, it is explicitly stated in its constitutional documents or in the Internal Procedures Manual as applicable
  • It may consist of an unlimited number of investors
  • It can benefit from the passporting rights included in the AIFM Directive, for marketing a RAIF across Europe

The introduction of RAIFs is, without a question, a significant development in the Cyprus Fund industry as it gives more incentives to investors through a cost-effective and less time-consuming procedure and demonstrates a desire for Cyprus to remain competitive in the industry and a willingness to revolutionise the procedures in order to draw the attention of new investors.

For further information or advice contact our team – info@papakyriacoulaw.com