The first question in each and every discussion about funds in Cyprus is about the differences between an externally-managed Alternative Investment Fund (AIF) and a self-managed AIF with Limited Number of Persons (AIFLNP). The second question raised by almost all of our clients is which one is the best to have.
To address the first question, we have prepared the table below that outlines the key differences between the two approaches. The list of differences is not exhaustive but it gives a good idea on what each fund can and cannot do.
The second question is somewhat more difficult to tackle as there's no one-size-fits-all answer. For example, if you would like to attend conferences and have exhibition stands to distribute your fund then you will have to employ an externally-managed AIF. If, however, you would like to have a discrete arrangement where you operate the fund directly with a small expected number of Assets Under Management (AUM), then a self-managed AIFLNP might be a better option. Usually, after careful consideration of the listed differences, it becomes evident what is the most appropriate way.
Related Article: AIFLNP – Organisational Chart.
Last but not least, everyone is interested about the cost differences between the two structures. The question is rather simple but the answer might be rather complicated. This is because the fund is a ‘live’ organisation with hopefully increasing AUM and exposed to today’s everchanging regulatory environment. As such, the running cost of each structure can be misunderstood. Let’s see some examples:
It is therefore vital to optimise costs well after you have established which structure is the right for you. Sometimes the unmeasurable elements of our decisions tend to be the most expensive ones.
Related Article: AIFLNP – Compliance Calendar.
|Self-Managed AIFLNP||Externally-Managed AIF|
|Capital requirements||N/A (expected to change to EUR 50,000)||EUR 125,000|
|Setup & Operational Cost||Can be more expensive at inception but significantly cheaper than Externally Managed as the AUM grow||Can be cheaper at low levels of AUM but cost increases significantly with the fund size|
|Passporting||Not possible||Possible, subject to certain conditions|
|Control and discreteness||Full||Limited|
|Maximum number of investors||75||Unlimited|
|Type of investors||Professional / Well informed only||Any|
|Size limitation||EUR 100m with leverage / EUR 500m no leverage||Unlimited|
|Depositary||Required||May not appoint when AIFLNP’s:
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The information provided in this article is for general information purposes only. The information is not intended to be comprehensive or to include advice on which you may rely. You should always consult a suitably qualified professional on any specific matter.
B2B Lateral Thinking Solutions
B2B Lateral Thinking Solutions is a boutique consultancy operating from Cyprus and servicing private, corporate and institutional clients. Our team of dedicated, passionate and highly qualified professionals assists numerous clients across the EU, Russia and CIS countries. Lateral thinking is not only a name. Lateral thinking defines how we approach problems and our work ethic. We partner up with our clients to uncover solutions through indirect avenues and by employing creative thinking.
Cyprus Self-Managed Alternative Investment Funds with Limited Number of Persons (AIFLNP) - Compliance Calendar Have you ever been in a situation where although you have the competency to perform a task you are unsure what the totality of the task might be? This situation can arise when numerous regulatory requirements are imposed on an organisation and further exacerbated by the almost exponential increase in the velocity of change of these requirements.Read more