Alternative Investment Fund Manager (AIFM) Cyprus can offer specific advantages to non EU fund managers wishing to raise capital in Europe, as well as to develop a presence in the European market to benefit from the right to easily distribute their funds to investors in all EU countries.
One of the key issues monitored and assessed by many non EU fund managers is whether it makes sense to establish a European management company. There are related reasons for such considerations. First, the difficulties associated with utilizing the private placement regimes, and second, the recognition that even if or when the AIFMD marketing passport is extended to non-European fund managers, there is likely to be a period of uncertainty of application and approach – and in any case this demands full compliance with AIFMD requirements. As such, establishing a European management company is an attractive solution.
Another solution is the use of management company platforms, which are currently the most popular means of gaining entrance into Europe. This trend is very wide with the number of platform providers growing in Cyprus and across the rest of Europe.
The platform solution provides investment managers with a fully compliant UCITS/AIFM entity and, consequently, a European passport to market their funds within the EU, without the need to establish their own fund and/or management company substance in an EU member country. Managers benefit from the efficiencies provided by the pre-existing structure of the platform in terms of sharing costs, existing middle and back office operating models, tried and tested systems and speed to market. It should be noted that third party platforms are generally umbrella fund structures, which allow investment managers or promoters to join the platform within which they can manage their own separate sub-fund (compartment) in accordance with their own investment strategies.
AIFM in Cyprus
Cyprus AIFM marketing an EU AIF in the EU
- EU regulator to regulator notification: The cross border marketing by the Cyprus AIFM of an EU AIF is subject only to a notification procedure, under which relevant information is provided to the host member country by the AIFM's regulator (the notification procedure is similar to that for UCITS operators under UCITS IV)
Cyprus AIFM marketing a non-EU AIF in the EU
- Through Private Placement: a Cyprus AIFM may market a non-EU AIF to professional investors in the EU under the national private placement regimes (and those EU AIFs which are feeders of a non EU AIF master fund) provided that:
- It is authorised under, and complies in full with the AIFM Law except for the depositary provisions (however, an entity performing equivalent tasks has to be appointed subject to certain conditions)
- The third country where the non EU AIF is established is not listed by the Financial Action Task Force (FATF) as a Non-Cooperative Country and Territory (NCCT)
- Appropriate cooperation arrangements are in place between CySEC and the regulator in the country of establishment of the non-EU AIF
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.