AIF, RAIF or AIFLNP: How to choose a Cyprus fund structure you won’t regret
Cyprus offers three main structures for alternative investment funds. Each solves a different problem, and choosing the wrong one is expensive to undo. Here is how to match the structure to your investors, your manager and your timetable.
At the end of 2025, Cyprus was home to 198 alternative investment funds. More than half of them, 107 in all, were Registered Alternative Investment Funds (RAIFs). The rest were split between 51 Alternative Investment Funds (AIFs) and 40 AIFs with a limited number of persons (AIFLNPs).
Fund managers have clearly voted for the RAIF. It is quick to launch and needs no fund-level authorisation from the regulator.
107 RAIFs domiciled in Cyprus, Q4 2025 | 51 AIFs (unlimited number of persons) | 40 AIFLNPs (up to 50 investors) |
That does not make it the right choice for you. The RAIF solves one problem very well: getting a professionally managed fund to market quickly. It cannot accept retail investors, it cannot run itself, and it comes with a permanent dependence on an external manager. For some funds, those are minor points. For others, they decide the matter.
This guide explains what each structure is built for, where each one falls short, and how to choose between them before you spend money on documents.
Why the choice matters more than it looks
A fund structure is not a label you can easily change. It shapes who you can raise money from, who must manage the fund, what the regulator reviews, and how much the fund costs to run every year. Changing structure later usually means new constitutional documents, new regulatory filings and the consent of your investors, at the moment you would rather be investing.
Most structuring mistakes come from starting with the wrong question. ‘Which is fastest?’ or ‘Which is cheapest?’ matter, but they are not the first questions to ask.
Three questions that decide most cases
1. Who are your investors? If you want to accept retail investors, only an AIF can do so. RAIFs and AIFLNPs are limited to professional and well-informed investors. A well-informed investor must, among other conditions, confirm in writing that they understand the risks and either invest at least €125,000 or be assessed by a regulated firm as having the necessary expertise.
2. Who will manage the fund? A RAIF must always be managed by an external, authorised manager. An AIF or AIFLNP can be managed internally by its own board, within limits, or externally.
3. How many investors, and how quickly? An AIFLNP is capped at 50 investors. A RAIF can typically launch in about a month; an AIF or AIFLNP needs authorisation from the Cyprus Securities and Exchange Commission (CySEC), which by law must decide within six months of a complete application.
Answer those three honestly and the choice usually narrows to one structure, sometimes two.
The AIF: the full-service option
The AIF with an unlimited number of persons is Cyprus’s fully authorised fund. CySEC reviews and approves the fund itself, which takes longer but gives the widest flexibility.
■ Investors: the only structure that can accept retail investors, alongside professional and well-informed ones. Funds marketed to retail investors face additional investment restrictions.
■ Management: internally by its own board, or externally by an authorised manager.
■ Capital: an internally managed AIF needs at least €125,000 of initial capital, rising to €300,000 if it falls within the full scope of the EU rules for alternative fund managers. There is no minimum if it is externally managed.
■ Oversight: a depositary with full duties, covering safekeeping, cash monitoring and oversight.
■ Forms: company with variable or fixed capital, limited partnership or common fund, with umbrella compartments if needed.
Best suited to funds that want a broad or retail investor base, sponsors who want to manage the fund themselves, and strategies where the regulator’s approval is itself a selling point.
The RAIF: speed through a borrowed licence
A RAIF is not authorised by CySEC. Instead, its external manager files a notification, and CySEC enters the fund on its list of registered funds, typically within a month of a complete submission. The regulator relies on the manager’s authorisation rather than reviewing the fund.
■ Investors: professional and well-informed investors only.
■ Management: always external, normally by a full-scope EU alternative investment fund manager (AIFM). The one exception is a closed-ended limited partnership RAIF investing at least 70% in illiquid assets, which may instead use a smaller sub-threshold manager, a UCITS management company or an investment firm.
■ Capital: no minimum initial capital.
■ Oversight: a depositary with full duties.
■ Restrictions: no general investment limits, but a RAIF cannot be a money market fund, and loan origination strategies are subject to additional conditions.
The trade-off is the borrowed licence. The external manager carries regulatory responsibility, so it will expect real oversight of the strategy, charge accordingly, and must agree to any material change. If the relationship breaks down, replacing the manager is possible but rarely quick.
Best suited to emerging managers with committed professional investors, a clear strategy and a reason to launch now.
The AIFLNP: the private room
The AIFLNP is CySEC-authorised, but its requirements are lighter because its investor base is small and sophisticated.
■ Investors: professional and well-informed investors only, capped at 50 natural persons, counted on a look-through basis and across all compartments.
■ Management: internally or externally. An internally managed AIFLNP needs €50,000 of initial capital. If its assets grow beyond the EU thresholds (€100 million with leverage, or €500 million without leverage where investors are locked in for five years), the full EU rules for fund managers apply.
■ Oversight: a depositary is generally required, but only for safekeeping. It can be dispensed with if total assets do not exceed €5 million, if the fund documents limit it to five investors for its whole life, or if no more than 10% of its assets are of a kind held in custody and there are no more than 25 investors, each investing at least €500,000.
■ Forms: company or limited partnership, with umbrella compartments if needed.
Best suited to family offices, club deals and small groups of investors who know one another and want regulated governance without the full weight of a public-facing fund.
AIF, RAIF and AIFLNP side by side
| AIF | RAIF | AIFLNP |
Regulatory approval | CySEC authorisation | Entered on CySEC’s register; no fund authorisation | CySEC authorisation, lighter regime |
Typical timeline | Up to six months by law; often four to six | About one month from complete submission | Up to six months by law; often three to five |
Eligible investors | Retail, professional and well-informed | Professional and well-informed | Professional and well-informed |
Maximum investors | No limit | No limit | 50 |
Manager | Internal or external | External only | Internal or external |
Initial capital if internally managed | €125,000 (€300,000 if in full AIFMD scope) | Not applicable | €50,000 |
Depositary | Required, full duties | Required, full duties | Safekeeping only; exemptions available |
Legal forms | Company, limited partnership, common fund | Company, limited partnership, common fund | Company, limited partnership |
Main restriction | Extra rules if marketed to retail investors | No money market funds; extra conditions on loan origination | Hard cap of 50 investors |
Simplified summary based on the Alternative Investment Funds Law of 2018 as amended and published guidance. Timelines depend on the completeness of the application.
Three scenarios, three answers
A family office pooling capital: AIFLNP
Three branches of a family, 14 adults in total, want to pool €20 million into a single portfolio with independent valuation, clear rules for a relative who wants to exit, and a compartment for each branch’s preferences. Every family member qualifies as a well-informed investor.
An AIFLNP fits. The family is well under the 50-investor cap, can manage the fund through its own board, and gets segregated compartments. With €20 million, the €5 million and five-investor exemptions do not apply, so a depositary is needed, but only for safekeeping. If the portfolio were almost entirely property or private companies, the third exemption might remove that requirement too.
An emerging manager in a hurry: RAIF
A portfolio manager leaves a larger firm. Eighteen professional investors have committed €35 million to a private equity strategy in South-East Europe and want to close within the quarter. The manager has no licence of its own.
A RAIF managed by an established third-party AIFM gets the fund to market in weeks. Had the strategy been direct lending to companies, the extra conditions on loan origination, and the new EU lending rules described below, would need working through before choosing the RAIF.
A real estate fund for wider investors: AIF
A developer wants to offer a residential income fund to local savers with modest tickets. Only an AIF can accept retail investors. The sponsor should plan for the longer authorisation, retail investment restrictions and higher running costs from the outset.
When a fund is the wrong answer
A founder wants to move a personal portfolio of €8 million into ‘a fund’ for prestige or tax reasons. Under EU rules, an investment fund raises capital from a number of investors; a vehicle set up for one person’s wealth usually falls outside that definition. A holding company, a family office structure or a trust is likely to be simpler, cheaper and more honest about its purpose.
The honest cost-benefit
■ AIF: the widest market and the most regulatory comfort, at the price of the longest timeline, the heaviest governance and the highest running costs.
■ RAIF: the fastest route to market and no fund-level authorisation, at the price of permanent dependence on an external manager and its fees.
■ AIFLNP: lighter rules and possible self-management, at the price of a hard cap of 50 investors. A fund that outgrows the cap will need restructuring.
The cheapest structure to set up is not always the cheapest to own. Choose for the fund you will be running in five years, not the one you are launching next month.
Substance requirements, whichever you choose
Regulators, banks and investors judge a fund by how it actually operates. Every Cyprus structure needs:
■ A board or manager that genuinely decides, with minutes that show challenge, not just approval.
■ A depositary and an administrator appointed before launch, with clear service agreements.
■ A written valuation policy and independent calculation of net asset value.
■ Investor due diligence that confirms each investor’s eligibility and source of funds.
■ Regular reporting: audited annual and unaudited half-yearly reports to CySEC and investors.
■ A plan to reach the minimum assets the law requires within the permitted period after launch.
What is changing
AIFMD II, the latest revision of the EU rules for alternative fund managers, was due to be part of national law by 16 April 2026. Cyprus has not yet completed the process, although CySEC already expects managers of open-ended funds to have selected liquidity management tools under its Circular C743, with detailed calibration for existing funds due by 16 April 2027. AIFMD II also introduces common EU rules for funds that originate loans, including leverage limits, which may eventually change how loan strategies fit within each Cyprus structure. CySEC has also consulted on making limited partnership funds simpler to run. Managers choosing a structure now should allow for these changes in their documents.
Frequently asked questions
What is the difference between an AIF and a RAIF in Cyprus?
An AIF is authorised by CySEC, can accept retail investors and can be managed internally. A RAIF is not authorised at fund level; it is entered on CySEC’s register, typically within a month, must be managed by an external authorised manager and is limited to professional and well-informed investors.
How many investors can an AIFLNP have?
Up to 50 professional or well-informed investors, counted on a look-through basis and across all of the fund’s compartments.
Can a Cyprus fund be self-managed?
An AIF or an AIFLNP can be managed internally by its own board, subject to minimum capital and the EU thresholds for authorised managers. A RAIF must always have an external manager.
What this means for you
Start with your investors, then your manager, then your timetable. Retail investors point to an AIF. A small, close-knit group points to an AIFLNP. Committed professional investors and a reason to move quickly point to a RAIF, provided you are comfortable relying on an external manager for the life of the fund.
The popularity of the RAIF is a useful signal, but it is a signal about other people’s funds, not yours.
If your fund doubled its investor base in five years, would its structure still fit?
NEXT IN THIS SERIES The number nobody checked. What a fund administrator actually does, and why independence matters.
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