Alternative Investments Funds Law 2014


Cyprus implemented in its legal system the Alternative Investment Funds Law of 2014 (the “AIF Law”) in July 2014. The AIF Law replaces and repeals the International Collective Investment Schemes Law (the “ICIS Law”), which governed the international investment funds since 1999 in Cyprus.

According to the AIF Law the supervisory body for the regulation and supervision of Alternative Investments Funds (“AIF”) is the Cyprus Securities and Exchange Commission (“CySec”) instead of the Central Bank of Cyprus, which was the regulatory authority according to the ICIS Law.

The AIF Law adopts the relevant European Union Directives on asset management and protection and updates the funds regime in Cyprus in an effort to focus on transparency and investors' protection. The relevant rules for the authorization, operating conditions, transparency requirements and management of AIFs as well as the roles of their directors, custodians and managers are now standardized under the AIF Law.


An AIF is a collective investment undertaking, including its investment compartment, which raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of the investors and that has not been authorized as a UCITS. It also has the exclusive purpose of the investors' collective investment of its available capital in assets to ensure the benefit of the results of the management of their assets.

Classification of AIFs

a) Unlimited

AIFs can be made available to an unlimited number of investors thus being unlimited. These can be marketed either to retail and/or to well informed professional investors. They can have investor shares, which are freely transferable and may be listed on a Stock Exchange.

Unlimited AIFs are subject to minimum capital requirements equal to Euro 125,000 or Euro 300,000 in cases of self–managed AIF or Alternative Investment Fund Managers.

An unlimited AIF can take the form of a mutual fund.

b) Restricted

AIFs can take the form of restricted funds as they are marketed to 75 investors or fewer. The difference is that they are marketed to well informed professional investors only. The definition of a well informed professional investor follows the MiFid requirements.

Both types of AIFs can be open-ended or closed–ended funds. Whereas AIFs enables public offerings of shares of AIFs and securities issued by AIFs can also be listed, this allows the increase of liquidity, marketability and participation of potential investors.

Structuring options

The AIF can take the form of a variable capital company or a fixed capital company or a limited partnership.

The innovation of the AIF Law is that it introduces new structuring options, which were not available under previous legislative frameworks, i.e. an umbrella structure with multiple investment compartments allowing the management of different pools of assets with distinct investment policies, while each such pool has its safeguarding requirements.

It can also be a common contractual fund where investors participate jointly as co-owners of the assets of the AIF. An Alternative Investment Fund Manager (“AIFM”) can undertake the management of an AIF to act as the internal fund manager of the AIF or an AIF can be managed by external AIFMs. External managers can be a UCITS Management Company having the authorization to proceed with such undertaking or an investment firm also authorized by its competent authority to act as such.


Under the AIF Law the AIFM must ensure that a single depositary is appointed in regards to each individual AIF. The depositary can now be not only a credit or a banking institution but also an investment firm or another category of institution subject to eligibility as per the relevant regulations of the depositary requirements and conditions as set by the European Union Member States. This offers mostly convenience to AIFs, which do not invest in financial and money market institutions solely, but also to private equity and real estate funds.

The new AIF Law brings Cyprus into the 21st century of the investment funds regime. Cyprus will now be able to assist investors in the international funds market in addition to its corporate income tax rate and other tax benefits.