Cyprus becomes Amicorp’s 12th Fund Services jurisdiction
Amicorp’s Office in Nicosia, Cyprus now fields a dedicated fund services team, further enhancing our offering both globally and within the EU. The launch comes on the back of Cyprus’ emergence as a credible fund domicile as evidenced by the tripling in assets under management since 2013, and the admission in 2016 of the local industry association, CIFA, as a full member of EFAMA, the corresponding pan-European body.
Adoption of UCITS IV in 2012 and the AIFMD in 2013 provided the necessary foundation for this growth, through a fully EU compliant legal and regulatory framework supervised by a single regulator, CySEC, whose goal is a business-friendly approach coupled with close adherence to pronouncements of the European regulator, ESMA. Besides its favorable geographic location and tax environment, Cyprus offers a lower cost proposition without compromising on professional service standards. The former makes possible establishment of funds with relatively low assets under management, while the latter limits execution risk.
Available types of Investment Funds
As with other EU jurisdictions, both UCITS vehicles for traditional investment assets and AIFs for alternative assets are available. Under current Cyprus law, AIFs come in two variants: AIFs for a limited number of persons (AIFLNP) and “standard” AIFs. AIFLNPs have proved popular for high-net-worth individuals (HNWIs) and smaller institutional managers. Running costs can be quite low especially where there are fewer than five investors or fund assets are below EUR 5 million which does away with the need to appoint a depositary. While they can invest freely with virtually no restrictions, AIFLNPs come with a minimum participation amount of EUR 125,000 and can accommodate a maximum of 75 investors and EUR 100 million in assets (rising to EUR 500 million if unlevered coupled with a five-year lock-up period). The principal differences of standard AIFs are the absence of limits on minimum participation amount, the number of investors, or value of assets. They can also be offered to professional investors across the EU through passporting i.e. a simplified regulator-to-regulator notification mechanism instead of having to obtain time-consuming country-by-country approvals.
Use of Fund Structures
All professional asset managers have long recognized the advantages of regulated fund structures. Their perceived higher levels of investor protection often translate into higher assets under management. This is especially true in the EU, given the success of the UCITS product, a feat that AIFMD set out to emulate. Structuring options for AIFs are virtually limitless with three different legal forms being available, coupled with open/closed-ended terms, master/feeder, and umbrella structures. The latter is especially suited to smaller managers seeking a host platform within which they can manage their own separate sub-fund (compartment).
AIF structures are also increasingly being used by HNWIs and family offices who value their flexibility, transparency, and protection. All family assets irrespective of type can be grouped in a single structure while still being under separate investment mandates, beneficiaries, or liquidation terms. Such a setup is often easier to understand and manage than for example trusts and foundations. Worth noting also is that AIFs investing in Cyprus assets are eligible under the Republic’s citizenship-by-investment program. As with professional funds, great structuring flexibility exists including a choice between self-managed and externally managed AIFs. Below is just one example out of many possibilities. In this case, the AIFLNP fund serves as a vehicle for pooling of family assets while maintaining control through self-management of the fund.
How Amicorp can help
Amicorp Fund Services is licensed and recognized as a fund administrator in 12 countries and has been actively administering assets for both traditional and alternative funds for over 20 years. Aided by one of the most sophisticated software packages in the market, PFS Paxus, which integrates the accounting and investor registry functions, we can cut data processing time significantly without compromising on accuracy. The latter is further bolstered by our ISAE 3402 Type II certification. At the same time, the combination of centralized global processing, coupled with local teams on the ground at each jurisdiction we service, provides the best of both worlds: cost-effectiveness without loss of personal touch. Amicorp (Cyprus) Ltd, a fully integrated Amicorp office for over ten years, is ideally placed to address Cyprus AIFs’ operational needs both now and shortly following the introduction of the law regulating fund administration. The service offering is comprehensive, covering:
- Implementation of agreed structure, i.e., legal establishment, regulatory licensing, and selection of service providers;
- Fund administration, accounting, registry, and transfer agency services;
- Corporate services (registered office, statutory returns, etc.); and
- Outsourcing of control functions (compliance, risk, internal audit).