On 30 July 2018, a new legislation on Alternative Investment Funds came into force. The new law, Law 124(I)/2018, effectively replaces the old legal framework regulating Alternative Investment Funds (Law 131(I)/2014) and forms part of a series of measures aiming at reinforcing the existing Alternative Investment Funds regulatory framework as well as strengthening the position of Cyprus in the global funds industry, with the introduction of a new form of Alternative Investment Fund (AIF), the Registered AIF (RAIF).

The most important change introduced by the new law, is the possibility of structuring an Alternative Investment Fund in Cyprus as a Registered AIF (RAIF), offering in this way an easier, quicker and less regulated funds product.

RAIFs are not subject to authorisation by the Cyprus Securities and Exchange Commission (CySEC) but are only subject to a notification regime to the CySEC, with regulation in this way being shifted, consistent with European trends, from product level to the level of the external manager.

The main characteristics of RAIFs include the following:

1. RAIFs (other than RAIFs which take the form of limited partnerships) should be externally managed by an Alternative Investment Fund Manager (AIFM) established in Cyprus or in another EU member state.  RAIFs which take the form of closed-ended limited partnerships and with at least 70% of their assets being illiquid, may also be externally managed by non-AIFM managers such as investment firms, UCITS management companies and authorised AIF managers managing assets under the AIFMD thresholds);
2. RAIFs can be open or closed ended;
3. RAIFs  can be structured as an investment company of fixed or variable capital, mutual fund or a limited partnership with or without legal personality;
4. RAIFs should be exclusively addressed to professional and/or well-informed investors;
5. Possibility of being structured as an umbrella fund with multiple investment compartments;
6. Appointment of a local depositary;
7. AIFMD passporting rights for distribution within the EU;
8. No minimum capital requirements;
9. Should have minimum assets under management of at least EUR 500,000 or the equivalent in another currency within the first twelve months of authorization.

The passing of the new law has been complemented by the passing of amendments to existing tax laws, enhancing the existing tax benefits afforded to investment funds, fund managers and investors.