{"id":147908,"date":"2026-09-08T08:53:15","date_gmt":"2026-09-08T08:53:15","guid":{"rendered":"https:\/\/my.legal500.com\/guides\/?post_type=comparative_guide&#038;p=147908"},"modified":"2026-09-08T08:53:15","modified_gmt":"2026-09-08T08:53:15","slug":"cyprus-alternative-investment-funds","status":"publish","type":"comparative_guide","link":"https:\/\/my.legal500.com\/guides\/chapter\/cyprus-alternative-investment-funds\/","title":{"rendered":"Cyprus: Alternative Investment Funds"},"content":{"rendered":"","protected":false},"template":"","class_list":["post-147908","comparative_guide","type-comparative_guide","status-publish","hentry","guides-alternative-investment-funds","jurisdictions-cyprus"],"acf":[],"appp":{"post_list":{"below_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Yiasemis LLC<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/04\/yiasemis-Y-mark-final-3000-1.jpg\"\/><\/span><\/div>"},"post_detail":{"above_title":"<div class=\"guide-author-details\"><span class=\"guide-author\">Yiasemis LLC<\/span><span class=\"guide-author-logo\"><img src=\"https:\/\/my.legal500.com\/guides\/wp-content\/uploads\/sites\/1\/2026\/04\/yiasemis-Y-mark-final-3000-1.jpg\"\/><\/span><\/div>","below_title":"<span class=\"guide-intro\">This country specific Q&amp;A provides an overview of Alternative Investment Funds laws and regulations applicable in Cyprus<\/span><div class=\"guide-content\"><div class=\"filter\">\r\n\r\n\t\t\t\t<input type=\"text\" placeholder=\"Search questions and answers...\" class=\"filter-container__search-field\">\r\n\t\t\t<\/div>\r\n\r\n\t\t\t\r\n\r\n\r\n\t\t\t<ol class=\"custom-counter\">\r\n\r\n\t\t\t\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the principal legal structures used for Alternative Investment Funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Cyprus Alternative Investment Funds (AIFs) are established under the Alternative Investment Funds Law of 2018 (Law 124(I)\/2018) (the \u201cAIF Law\u201d), which makes four legal forms available: the common fund (a contractual, unitised vehicle), the variable capital investment company (VCIC), the fixed capital investment company (FCIC) and the limited partnership, which may be established with or without separate legal personality.<\/p>\n<p>Whatever its legal form, every AIF falls within one of three regulatory categories:<\/p>\n<ul>\n<li>the AIF authorised by the Cyprus Securities and Exchange Commission (CySEC), which may admit retail investors alongside well-informed and professional investors and carries no cap on investor numbers;<\/li>\n<li>the AIF with a limited number of persons (AIFLNP), reserved for well-informed and\/or professional investors and capped at 50 natural-person investors; and<\/li>\n<li>the registered AIF (RAIF), which is entered on a CySEC register rather than authorised as a product, must be externally managed, and is likewise reserved for well-informed and\/or professional investors. Because supervision is exercised at the level of its manager, a RAIF typically reaches the market within approximately one month \u2013 the statutory period within which CySEC must examine a duly completed filing and enter the RAIF on the register.<\/li>\n<\/ul>\n<p>For closed-ended strategies \u2013 private equity, venture capital, real estate and private credit \u2013 the limited partnership is the dominant legal form, combining the contractual flexibility of a negotiated limited partnership agreement with income tax transparency. Open-ended strategies are usually housed in a VCIC or, less frequently, a common fund. Umbrella structures with legally segregated compartments are available for all forms under section 9 of the AIF Law.<\/p>\n<p>Managers are almost invariably Cyprus private companies limited by shares, licensed either as full-scope alternative investment fund managers (AIFMs) under the Alternative Investment Fund Managers Law of 2013 (Law 56(I)\/2013) (the \u201cAIFM Law\u201d), or as sub-threshold managers (\u201cMini-AIFMs\u201d) under the Mini-AIFM Law of 2020 (Law 81(I)\/2020).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does a structure provide limited liability to the investors? If so, how is this achieved?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, in all four legal forms. Shareholders in a VCIC or FCIC enjoy ordinary corporate limited liability under the Companies Law (Cap. 113), capped at any amount unpaid on their shares. Unitholders in a common fund are liable only up to their subscription. Limited partners in a limited partnership are liable up to their agreed contribution, provided they do not take part in the management of the partnership business; the general partner bears unlimited liability and is therefore invariably a special-purpose Cyprus limited company with no other assets or business. Customary limited partner involvement \u2013 serving on an advisory committee, voting on reserved matters or exercising consent rights under the limited partnership agreement \u2013 is structured so as not to amount to participation in management, and portfolio decision-making is kept exclusively with the general partner and the appointed manager.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is there a market preference and\/or most preferred structure? Does it depend on asset class or investment strategy?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The institutional default is the RAIF structured as a limited partnership with an external manager: the one-month registration timeline, the absence of product-level authorisation and the familiarity of the limited partnership format to international investors make it the route of choice for private equity, venture capital, real estate and credit sponsors. Open-ended and more liquid strategies \u2013 hedge-style, fund of funds, listed securities \u2013 tend to prefer the VCIC, whose share-based variable capital mechanics suit recurring subscriptions and redemptions. The AIFLNP retains a loyal following among family offices and club structures, since it may be self-managed and can benefit from a depositary waiver in defined circumstances. The choice is therefore driven primarily by strategy and investor base: closed-ended limited partnerships for illiquid asset classes; corporate open-ended vehicles for liquid ones; and either for real estate, depending on the exit and income profile.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the regulatory regime distinguish between open-ended and closed-ended Alternative Investment Funds (or otherwise differentiate between different types of funds or strategies (e.g. private equity vs. hedge)) and, if so, how?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. The AIF Law distinguishes between open-ended AIFs, whose investors may redeem their interests before the commencement of liquidation, and closed-ended AIFs, where they may not. The distinction carries practical consequences. Managers of open-ended AIFs must select at least two harmonised liquidity management tools for each fund \u2013 a requirement introduced by AIFMD II and already applied in Cyprus through CySEC Circular C743 ahead of full transposition (see question 1.5). Separately, a RAIF structured as a closed-ended limited partnership investing at least 70% of its assets in illiquid assets may appoint a Mini-AIFM (or an EU UCITS management company or MiFID portfolio manager) instead of a full-scope AIFM \u2013 a concession commonly used by smaller private equity and venture managers.<\/p>\n<p>Beyond the open\/closed divide, the regime is strategy-neutral: there is no separate rulebook for private equity as against hedge strategies. Differentiation is achieved instead through the investor-based categories (authorised AIF, AIFLNP, RAIF), with retail-facing authorised AIFs subject to risk-spreading and eligible-asset rules under CySEC directives, and through directly applicable EU overlays such as EuVECA, ELTIF 2.0 and, once AIFMD II is fully transposed, the dedicated loan-origination regime.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any limits on the manager\u2019s ability to restrict redemptions? What factors determine the degree of liquidity that a manager offers investors of an Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>For AIFs reserved to well-informed and professional investors, redemption terms are essentially contractual: the AIF Law does not prescribe minimum redemption frequencies, and lock-ups, notice periods and gates may be set freely in the fund documents. The main discipline comes from the manager\u2019s duties under the AIFMD framework. The investment strategy, liquidity profile and redemption policy of each AIF must be consistent with one another, and liquidity must be stress-tested regularly. Investors must receive clear pre-investment disclosure of their redemption rights and of the circumstances in which redemptions may be restricted, and they must be treated fairly. Suspension of redemptions is reserved for exceptional circumstances, must be justified by the interests of investors and involves notification to CySEC. Authorised AIFs admitting retail investors are subject to stricter, CySEC-prescribed redemption parameters.<\/p>\n<p>In practice, the liquidity offered reflects the liquidity of the underlying assets, the valuation cycle, the investor base and the strategy\u2019s capacity profile. Following AIFMD II, managers of open-ended AIFs must select at least two liquidity management tools from the harmonised list and embed them in the fund documents: CySEC Circular C743 (December 2025) required selection and constitutional amendments in line with the 16 April 2026 deadline, with detailed calibration for pre-existing funds to follow by 16 April 2027.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are potential tools that a manager may use to manage illiquidity risks regarding the portfolio of its Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The toolkit available to Cyprus managers mirrors the harmonised AIFMD II menu and established market practice:<\/p>\n<ul>\n<li>hard and soft lock-up periods, extended notice periods and less frequent dealing days;<\/li>\n<li>redemption gates at fund or investor level, and extension of notice periods;<\/li>\n<li>redemption fees, swing pricing, dual pricing and anti-dilution levies;<\/li>\n<li>redemptions in kind (for professional investors) and side pockets for assets that become illiquid; and<\/li>\n<li>suspension of subscriptions and redemptions as a last-resort measure.<\/li>\n<\/ul>\n<p>CySEC has adopted the ESMA Guidelines on liquidity management tools (Circular C776) and requires the selected tools to be reflected in the fund rules or partnership agreement. Closed-ended funds manage illiquidity structurally rather than through redemption mechanics \u2013 through capital-call funding, distribution waterfalls, recycling provisions, fund-term extensions (typically two one-year extensions) and, increasingly, continuation vehicles established as new compartments under the same umbrella.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions on transfers of investors\u2019 interests?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There are no statutory restrictions beyond investor eligibility: interests in AIFLNPs and RAIFs may be transferred only to persons who themselves qualify as well-informed or professional investors, and an AIFLNP must continue to respect its 50 natural-person cap. Contractual restrictions are, however, the norm \u2013 general partner or board consent, rights of first refusal and prohibitions on transfers to competitors or sanctioned persons \u2013 and transferees undergo AML\/KYC onboarding. On the tax side, transfers are frictionless: disposals of fund interests are exempt from taxation as disposals of \u201ctitles\u201d (subject to a narrow exception for funds holding Cyprus immovable property), and stamp duty was abolished altogether with effect from 1 January 2026.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any other limitations on a manager\u2019s ability to manage its funds (e.g., diversification requirements)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>AIFLNPs and RAIFs are not subject to statutory diversification or investment restrictions; the binding parameters are those the manager sets in the offering document. Authorised AIFs admitting retail investors are subject to risk-spreading and eligible-asset rules prescribed by CySEC directive, broadly modelled on UCITS principles. At manager level, the AIFMD framework applies: independent risk management and valuation, liquidity management, leverage monitoring and reporting, and CySEC\u2019s power to impose leverage limits on systemic grounds. Managers electing EU product regimes accept their constraints \u2013 EuVECA\u2019s 70% qualifying-investment test or the ELTIF eligible-asset and diversification rules. AIFMD II will add a harmonised regime for loan-originating AIFs, including single-borrower diversification caps and leverage limits of 175% (open-ended) and 300% (closed-ended), which Cyprus managers with private credit strategies are already building into fund design.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the local tax treatment of (a) resident, (b) non-resident, (c) pension fund and (d) sovereign wealth fund investors (or any other common investor type) in Alternative Investment Funds? Does the tax status or preference of investors or the tax treatment of the target investments primarily dictate the structure of the Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>At fund level, limited partnerships and common funds are transparent for income tax purposes, while VCICs and FCICs are taxable persons subject to corporate income tax at 15% (increased from 12.5% with effect from 1 January 2026). In practice, corporate-form AIFs bear little tax. Gains on disposals of \u201ctitles\u201d (shares, bonds, units and similar instruments) are exempt from income tax without holding-period or ownership conditions; the main qualification is capital gains tax on disposals of unlisted shares in companies holding Cyprus immovable property. Qualifying inbound dividends benefit from the participation exemption, and a notional interest deduction is available on new equity. There is no subscription or net-asset tax, fund management services are VAT-exempt, and each compartment of an umbrella AIF is assessed separately.<\/p>\n<p>(a) Resident investors: Cyprus companies receive fund distributions largely tax-free under the participation exemption and realise exempt gains on disposal of their interests. Resident individuals pay Special Defence Contribution (SDC) on dividends \u2013 reduced from 17% to 5% for distributions from 1 January 2026 \u2013 plus a capped 2.65% national health contribution; resident non-domiciled individuals are exempt from SDC altogether for 17 years (with an extension mechanism introduced by the 2026 reform).<\/p>\n<p>(b) Non-resident investors: Cyprus imposes no withholding tax on dividends, interest or royalties paid to non-residents (subject to defensive measures targeting EU-blacklisted and low-tax jurisdictions) and does not tax their gains on disposal or redemption. Investors in tax-transparent Cyprus funds are statutorily deemed not to acquire a Cyprus permanent establishment merely by investing, so allocated profits generally remain outside the Cyprus net.<\/p>\n<p>(c) Pension funds and (d) sovereign wealth funds: no special regime exists \u2013 nor is one needed, since the absence of withholding tax and of tax on disposals means that such investors are, in practice, not taxed in Cyprus. Treaty relief under Cyprus\u2019s network of more than 65 double tax treaties, and customary sovereign immunity principles, provide further protection where relevant.<\/p>\n<p>Investor tax status influences the choice of legal form \u2013 investors preferring look-through treatment drive the use of the limited partnership \u2013 but the regulatory category is dictated by strategy and investor base rather than tax. A Cyprus-specific pull factor for sponsors is the flat 8% personal tax rate on carried-interest-linked variable remuneration available to qualifying executives of AIFMs, self-managed AIFs and their delegates under Articles 20B and 20C of the Income Tax Law. That regime was introduced with the 2018 fund-sector tax package and was most recently updated by the 2026 tax reform; it is subject to a EUR10,000 minimum annual tax liability and a ten-year cap per individual.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rights do investors typically have and what restrictions are investors typically subject to with respect to the management or operations of the Alternative Investment Fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Investors are passive by design. In limited partnership funds, investor influence is typically channelled through the limited partnership agreement and commonly includes:<\/p>\n<ul>\n<li>consent rights over reserved matters, such as conflicted transactions, material amendments and extensions of the investment period or fund term;<\/li>\n<li>a limited partner advisory committee;<\/li>\n<li>key-person protections; and<\/li>\n<li>in institutional funds, removal of the general partner for cause (and occasionally without fault at a supermajority vote).<\/li>\n<\/ul>\n<p>In corporate AIFs, shareholders exercise the rights attaching to their shares in general meeting, including director appointments where the articles so provide.<\/p>\n<p>All investors benefit from the AIFMD disclosure architecture: prescribed pre-investment disclosures, an annual report within six months of year-end, periodic NAV reporting and disclosure of preferential treatment. The restrictions are the mirror image of the rights: no participation in day-to-day management (which for limited partners would jeopardise limited liability), maintenance of eligibility status, contractual transfer restrictions and default remedies \u2013 including dilution or forfeiture mechanics \u2013 for failure to fund capital calls.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Where customization of Alternative Investment Funds is required by investors, what types of legal structures are most commonly used?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The workhorse is the umbrella AIF under section 9 of the AIF Law: its compartments are segregated as a matter of law, allowing terms tailored to a particular strategy, investor group or transaction under a single registration. Within a single fund, classes of shares or units typically carry bespoke fee, currency, distribution and liquidity terms, while side letters address investor-specific undertakings. For larger mandates, the market commonly uses parallel and feeder limited partnerships alongside the main fund, as well as dedicated co-investment vehicles (a compartment or an SPV beneath the fund). Where full customisation is required, a managed account under a MiFID portfolio management mandate may be used outside the fund wrapper altogether.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are managers or advisers to Alternative Investment Funds required to be licensed, authorised or regulated by a regulatory body?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. An external manager of a Cyprus AIF requires a CySEC licence in all cases. Where assets under management exceed the AIFMD thresholds \u2013 EUR100 million where leverage is used, or EUR500 million for unleveraged closed-ended funds with five-year lock-ups \u2013 the manager must be authorised as a full-scope AIFM under the AIFM Law. Below those thresholds, the manager must be licensed as a Mini-AIFM under the Mini-AIFM Law; in Cyprus this is a full authorisation process, rather than the lighter registration applied to sub-threshold managers in some other member states. Self-managed AIFs are licensed in their own right. Initial capital requirements are EUR125,000 for an external AIFM and EUR300,000 for a self-managed AIF (plus additional own funds of 0.02% of assets above EUR250 million), and EUR50,000 for a Mini-AIFM (plus 0.02% of assets above EUR125 million, with a board of at least four individuals of whom at least two are executive). A full-scope AIFM also benefits from the EU-wide AIFMD management and marketing passports, and qualifying venture capital managers may alternatively register under the EuVECA Regulation.<\/p>\n<p>The provision of investment advice as a standalone service in Cyprus is a MiFID investment service. A firm providing it must either be authorised by CySEC as a Cyprus Investment Firm or be an investment firm authorised in another EU member state exercising its right to provide services in Cyprus under the MiFID II passport. Non-EU advisers are typically engaged through delegation arrangements complying with Article 20 of AIFMD, which require cooperation arrangements between the regulators involved and ongoing oversight by the delegating AIFM.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are Alternative Investment Funds themselves required to be licensed, authorised or regulated by a regulatory body?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, in all cases, although the intensity differs by category. Authorised AIFs and AIFLNPs require product-level authorisation from CySEC, with indicative timelines of four to six months and three to five months respectively from a complete file. A RAIF is not authorised as a product: it is registered on the CySEC RAIF register \u2013 typically within one month \u2013 and supervised through its external manager, which must be a full-scope AIFM unless the RAIF is a closed-ended limited partnership investing at least 70% in illiquid assets, in which case a Mini-AIFM, an EU UCITS management company or an EU MiFID portfolio manager may act. All categories are subject to the AML framework, prescribed offering-document content, depositary requirements (with limited AIFLNP waivers) and annual reporting.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does the Alternative Investment Fund require a manager or advisor to be domiciled in the same jurisdiction as the Alternative Investment Fund itself?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No. A Cyprus AIF may be managed by an AIFM authorised in any EU member state exercising the AIFMD management passport, with CySEC retaining supervision of the AIF itself. There is no third-country management passport, so a non-EU manager cannot manage a Cyprus AIF directly; it participates instead as delegate of the appointed EU AIFM. Advisers may be domiciled anywhere, subject to the delegation framework. In practice most Cyprus AIFs appoint a Cyprus manager, both for coordination and because domestic substance supports the structure\u2019s tax and regulatory integrity.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there local residence or other local qualification or substance requirements for the Alternative Investment Fund and\/or the manager and\/or the advisor to the fund?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The AIF must have its registered office in Cyprus, and the directors of a self-managed AIF (or of the general partner) must satisfy CySEC\u2019s fitness and probity assessment. A Cyprus AIFM or Mini-AIFM must maintain both its registered and head office in Cyprus, with at least two experienced executives effectively conducting the business from Cyprus (the \u201cfour-eyes\u201d principle) and adequate local staffing and organisational substance. Delegation must not reduce the manager to a letter-box entity; substance and delegation arrangements are an area of active CySEC scrutiny, reinforced by AIFMD II. The depositary of a Cyprus AIF must be established in Cyprus (including through the Cyprus branch of an EU institution). Fund administrators providing services from or in Cyprus now require a CySEC licence under the Cyprus Investment Fund Administrators Law of 2025, which itself carries local head-office and resident-director requirements. Although the law does not impose residence requirements on fund directors as such, boards with a Cyprus-resident majority are standard so that management and control \u2013 and hence treaty-supported tax residence \u2013 sits in Cyprus.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What service providers are required by applicable law and regulation?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>A Cyprus AIF requires:<\/p>\n<ul>\n<li>an external manager (unless self-managed) \u2013 see question 2.1;<\/li>\n<li>a depositary: a credit institution, a MiFID investment firm or, for AIFs investing predominantly in assets not subject to custody (private equity, venture, real estate), a \u201cprofessional depositary\u201d registered under section 26(4) of the AIF Law. An AIFLNP is exempt from the depositary requirement in three cases: where its total assets do not exceed EUR5 million; where it has no more than five natural-person unitholders; or where custody-type assets do not exceed 10% of the portfolio and there are no more than 25 natural-person unitholders, each investing at least EUR500,000;<\/li>\n<li>a fund administrator, unless the manager administers in-house. Fund administration became a licensed activity under the Cyprus Investment Fund Administrators Law of 2025 (Law 101(I)\/2025), which came into force on 18 June 2025 subject to transitional arrangements for existing providers; Cyprus-established AIFMs and UCITS management companies are exempt when administering the funds they themselves manage;<\/li>\n<li>a statutory auditor for the annual report; and<\/li>\n<li>AML compliance arrangements, including a designated compliance officer.<\/li>\n<\/ul>\n<p>An external valuer is optional \u2013 valuation may instead be performed by a functionally independent internal function. Corporate vehicles must also appoint a company secretary, as required by the Companies Law. Legal advisers are customary.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are local resident directors \/ trustees required?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no statutory requirement for the directors of an AIF to be Cyprus resident. Trustees are not relevant, as the trust is not an available legal form for a Cyprus AIF. In practice, a majority of Cyprus-resident directors is the market norm, driven by the management-and-control test for tax residence and CySEC\u2019s substance expectations. Directors of self-managed AIFs, AIFMs, Mini-AIFMs and general partners are individually vetted by CySEC, and a licensed Cyprus fund administrator must have at least two Cyprus-resident executive directors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What rules apply to foreign managers or advisers wishing to manage, advise, or otherwise operate funds domiciled in your jurisdiction?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>An EU full-scope AIFM may manage a Cyprus AIF on a cross-border basis under the AIFMD management passport, following notification by its home regulator to CySEC. In that case the manager remains supervised by its home regulator, while CySEC continues to supervise the AIF\u2019s own compliance with the AIF Law. An EU UCITS management company or MiFID portfolio manager may act as external manager of a closed-ended limited partnership RAIF investing at least 70% in illiquid assets.<\/p>\n<p>A non-EU manager cannot itself be appointed as the manager of a Cyprus AIF, since AIFMD provides no third-country management passport. It must instead either act as delegate of the appointed EU AIFM under Article 20 of AIFMD \u2013 which requires cooperation arrangements between CySEC and its home regulator and demonstrable oversight by the delegating manager \u2013 or establish and license its own management company in Cyprus. Foreign advisers providing investment advice into Cyprus as a service require MiFID authorisation or an EU passport (see question 2.1).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the common enforcement risks that managers face with respect to the management of their Alternative Investment Funds?\u00a0<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>CySEC enforces through administrative fines, directions, licence suspension or withdrawal and public statements, with criminal exposure for unlicensed activity and materially false information. The recurring enforcement themes are:<\/p>\n<ul>\n<li>AML\/CFT shortcomings \u2013 investor onboarding, source-of-funds verification and ongoing monitoring remain the most frequent grounds for fines across the CySEC-regulated sector;<\/li>\n<li>operating outside the scope of the licence held;<\/li>\n<li>marketing communications inconsistent with the offering documents, including ESG claims measured against SFDR disclosures;<\/li>\n<li>weaknesses in valuation independence and errors in NAV calculation;<\/li>\n<li>deficiencies in delegation arrangements and local substance;<\/li>\n<li>late or inaccurate regulatory reporting; and<\/li>\n<li>departures from the investment parameters described in the offering document.<\/li>\n<\/ul>\n<p>DORA has also added ICT risk management and incident-reporting exposure since January 2025, and directors and executives face personal accountability through CySEC\u2019s fitness and probity regime.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What is the typical level of management fee paid? Does it vary by asset type?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Closed-ended private equity and venture funds typically charge 1.5% to 2% per annum on committed capital during the investment period, stepping down to invested or net invested capital thereafter; smaller venture funds occasionally reach 2.5%. Open-ended and hedge-style strategies typically charge 1% to 2% of NAV, and real estate and credit funds commonly sit at 1% to 1.5%. Fees must be fully disclosed in the offering document, and ESMA\u2019s supervisory focus on \u201cundue costs\u201d is relevant where retail investors are admitted.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is a performance fee or carried interest typical? If so, does it commonly include a \u201chigh water mark\u201d, \u201churdle\u201d, \u201cwater-fall\u201d, \u201cpreferred return\u201d or other condition? If so, please explain.<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Because the investor base of Cyprus funds is predominantly international, their economic terms track international norms. Closed-ended funds typically provide for 20% carried interest above an 8% preferred return with a 100% general partner catch-up, calculated on a European whole-of-fund waterfall: carry is paid only after investors have received back all drawn capital plus the preferred return. Deal-by-deal (American) waterfalls appear mainly in US-anchored structures. Open-ended funds typically charge performance fees of 15% to 20%, almost always subject to a high water mark so that fees accrue only on net new gains; hurdles are a matter of negotiation. Institutional investors increasingly require escrow and clawback protections against carry over-distribution. The flat 8% personal tax rate on carry-linked remuneration (see question 1.9) makes the economics particularly efficient for principals relocating to Cyprus.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are fee discounts \/ fee rebates or other economic benefits for initial investors typical in raising assets for new fund launches?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. First-close (\u201cearly bird\u201d) management fee discounts and founder classes with reduced fees \u2013 occasionally reduced carry \u2013 are common, typically limited by time or by a stated capacity. They are implemented through share or unit classes in corporate funds and through capital-account terms or side letters in limited partnerships.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are management fee \u201cbreak-points\u201d offered based on investment size?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Size-based tiering is commonly delivered through separate classes with descending fee rates or through side-letter rebates keyed to commitment size. Thresholds vary with fund size and strategy rather than following a fixed market grid.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are first loss programs used as a source of capital (i.e., a managed account into which the manager contributes approximately 10-20% of the account balance and the remainder is furnished by the investor)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No. First-loss arrangements are not a feature of the Cyprus market. Nothing in the regime prohibits them contractually, but we are not aware of Cyprus managers raising capital on this basis.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the typical terms of a seeding \/ acceleration program?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>There is no established domestic seeding market; where seed transactions occur they follow international convention \u2013 reduced fees and\/or carry, capacity rights, enhanced transparency, most-favoured-nation protection and occasionally a revenue share or equity stake in the management company, in exchange for a meaningful commitment locked in long enough to build track record. Programmatic anchor capital from public sources \u2013 most visibly the European Investment Fund-backed Cyprus Equity Fund \u2013 performs a comparable function, imposing eligibility, co-investment and reporting terms on participating managers.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What industry trends have recently developed regarding management fees and incentive\/performance fees or carried interest? In particular, are there industry norms between primary funds and secondary funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Fee pressure is concentrated on first-time and sub-scale managers; established sponsors are holding headline terms. Institutional investors are directing their negotiation energy at alignment rather than price: general partner commitments of 1% to 2%, full transaction-fee offsets, tighter recycling and expense caps, and ESG-linked reporting. GP-led secondaries and continuation vehicles are beginning to appear, conveniently housed as new compartments of an existing umbrella. There are no distinct domestic norms between primary and secondary funds \u2013 the handful of secondary-focused vehicles price off international benchmarks, with management fees below primary levels and carried interest below the primary 20%.v<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What restrictions are there on marketing Alternative Investment Funds?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Marketing is regulated on three axes: to whom, by whom and how. Authorised AIFs may be marketed to retail, well-informed and professional investors; AIFLNPs and RAIFs only to well-informed and professional investors. Marketing of a Cyprus AIF in Cyprus is covered by its authorisation or registration; outbound marketing to professional investors elsewhere in the EU proceeds under the AIFMD passport via a CySEC notification, and inbound marketing of EU AIFs mirrors that process. Non-EU AIFs and non-EU AIFMs may access Cyprus only under the national private placement route, which requires CySEC clearance, supervisory cooperation arrangements and AML-compliant home jurisdictions. The procedural framework for marketing in Cyprus \u2013 including marketing by sub-threshold managers and of non-passported AIFs \u2013 is set out in CySEC Directive DI131\/56\/02.<\/p>\n<p>As to manner, marketing communications must be identifiable as such, fair, clear and not misleading, balanced as between risk and reward, and consistent with the fund\u2019s prescribed disclosures \u2013 including SFDR disclosures for ESG claims \u2013 in line with the Cross-Border Distribution of Funds Regulation and the ESMA marketing guidelines. A PRIIPs KID is required where the fund is made available to retail investors, which includes well-informed investors who are not MiFID professionals.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the concept of \u201cpre-marketing\u201d (or equivalent) recognised in your jurisdiction? If so, how has it been defined (by law and\/or practice)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Cyprus applies the harmonised EU concept in Article 30a of AIFMD (introduced by the Cross-Border Distribution of Funds Directive): the provision of information or communications on investment strategies or ideas to potential EU professional investors to test their interest in an AIF which is not yet established or not yet notified for marketing. Pre-marketing materials must not amount to an offer, must not include subscription forms or final fund documents, and must state that they are incomplete and subject to change. The AIFM must notify CySEC by informal letter within two weeks of beginning pre-marketing. Any subscription by a pre-marketed investor within 18 months is treated as resulting from marketing, closing off reliance on reverse solicitation. Sub-threshold managers fall outside Article 30a as a matter of EU law, but prudent Cyprus practice applies the same discipline.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Can Alternative Investment Funds be marketed to retail investors?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes, but only authorised AIFs \u2013 AIFLNPs and RAIFs are closed to retail investors. Retail admission brings CySEC-prescribed risk-spreading and eligible-asset rules, enhanced disclosure and a PRIIPs KID, and distribution is overlaid by MiFID II suitability and appropriateness testing. ELTIF 2.0 provides an increasingly attractive alternative route to retail capital for long-term and private-asset strategies, with an EU-wide retail passport. It is worth noting that well-informed investors \u2013 who may technically be retail clients under MiFID \u2013 access AIFLNPs and RAIFs through the separate well-informed gateway (see question 4.5).<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Does your jurisdiction have a particular form of Alternative Investment Fund be that can be marketed to retail investors (e.g. a Long-Term Investment Fund or Non-UCITS Retail Scheme)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Cyprus has no separately branded retail AIF equivalent to the UK NURS or LTAF. The authorised AIF admitting retail investors performs that function domestically, subject to the retail-specific rules described in question 4.3. For cross-border retail distribution of long-term strategies, Cyprus managers use the ELTIF under Regulation (EU) 2023\/606 (ELTIF 2.0), while mainstream retail products are structured as UCITS.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the minimum investor qualification requirements for an Alternative Investment Fund? Does this vary by asset class (e.g. hedge vs. private equity)?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>For AIFLNPs and RAIFs, investors must be professional investors within MiFID II Annex II or \u201cwell-informed\u201d investors: persons who confirm in writing their awareness of the risks and who either invest at least EUR125,000 in the AIF or are assessed by a regulated firm (credit institution, investment firm, management company or AIFM) as having the expertise, experience and knowledge to evaluate the investment. An AIFLNP is additionally capped at 50 natural-person investors. For authorised AIFs that admit retail investors, no minimum eligibility criteria apply, although fund documents commonly set contractual minimum subscription amounts. The thresholds do not vary by asset class as a matter of law \u2013 the same tests apply to hedge, private equity and real asset strategies.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there additional restrictions on marketing to government entities or similar investors (e.g. sovereign wealth funds) or pension funds or insurance company investors?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No. Cyprus imposes no additional marketing restrictions specific to governmental, sovereign, pension or insurance investors. Such investors are instead constrained by their own investment rules \u2013 for occupational pension funds, the legislation implementing IORP II; for insurers, the Solvency II framework; and for sovereign investors, their internal policies. In practice these constraints surface as bespoke reporting, transferability and eligibility requests, which are typically addressed in side letters.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any restrictions on the use of intermediaries to assist in the fundraising process?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Placing fund interests and receiving or transmitting subscription orders are MiFID investment services. A Cyprus intermediary must therefore be an authorised investment firm (or credit institution), while an intermediary from another EU member state must be entitled to provide those services in Cyprus under the MiFID II passport; unregulated finders cannot lawfully solicit investors in Cyprus. Marketing conducted by an intermediary on behalf of the AIFM is attributed to the AIFM, which remains responsible for notification requirements and the compliance of the materials used. Managers must also apply AML due diligence to introducers and distribution channels, and distribution to retail investors triggers suitability obligations at distributor level under MiFID II, as implemented in Cyprus by the Investment Services and Activities and Regulated Markets Law of 2017.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Is the use of \u201cside letters\u201d restricted?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>No. Side letters are permitted and widely used. The constraint is the AIFMD fair-treatment principle: preferential treatment must not result in an overall material disadvantage to other investors, which in practice cautions against preferential redemption or liquidity rights in open-ended funds. The side-letter framework should also be consistent with the offering document as filed with CySEC.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">Are there any disclosure requirements with respect to side letters?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>Yes. Before investment, the AIFM must make available a description of any preferential treatment, the type of investors who obtain it and, where relevant, their legal or economic links with the AIF or its manager, in line with the AIFMD pre-investment disclosure framework. Cyprus practice mirrors the international pattern: the offering document describes the categories of preferential terms that may be granted, and closed-ended funds run a most-favoured-nation election process after final closing, in which side-letter terms \u2013 typically tiered by commitment size \u2013 are disclosed to electing investors.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\t\t\t\t\t<li class=\"question-block filter-container__element\">\r\n\t\t\t\t\t\t<h3 class=\"filter-container__match-html\">What are the most common side letter terms? What industry trends have recently developed regarding side letter terms?<\/h3>\r\n\t\t\t\t\t\t<button id=\"show-me\">+<\/button>\r\n\t\t\t\t\t\t<div class=\"question_answer filter-container__match-html\" style=\"display:none;\"><p>The most common terms are fee and carry discounts, most-favoured-nation protection, co-investment rights and enhanced information and reporting (notably Solvency II and IORP-driven data). Regulated investors also commonly seek transfer pre-approvals, excuse rights for legal or policy conflicts and key-person notification rights. These patterns hold for Cyprus funds, whose side letters are negotiated predominantly with international institutional investors.<\/p>\n<p>Three trends stand out. First, ESG and sanctions-compliance undertakings with exclusion-list mechanics have become routine. Secondly, information undertakings driven by FDI screening regimes are a live point in Cyprus: the new screening law (Law 194(I)\/2025, effective April 2026) can reach fund vehicles with 25% or more non-EU ownership, prompting investors and managers to allocate notification cooperation duties in advance. Thirdly, as the AIFMD II liquidity management framework takes effect, investors have begun to seek transparency commitments around the selection and activation of liquidity management tools. Managers are responding by tiering MFN elections to commitment size and resisting terms that cannot be offered across the book.<\/p>\n<\/div>\r\n\r\n\r\n\t\t\t\t\t<\/li>\r\n\r\n\t\t\t\t\r\n<div class=\"word-count-hidden\" style=\"display:none;\">Estimated word count: <span class=\"word-count\">5672<\/span><\/div>\r\n\r\n\t\t\t<\/ol>\r\n\r\n<script type=\"text\/javascript\" src=\"\/wp-content\/themes\/twentyseventeen\/src\/jquery\/components\/filter-guides.js\" async><\/script><\/div>"}},"_links":{"self":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide\/147908","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/comparative_guide"}],"about":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/types\/comparative_guide"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/guides\/wp-json\/wp\/v2\/media?parent=147908"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}