Alternative Investment Organisations (AIOs) are investment vehicles that pool capital from various investors to invest in alternative forms of investments, such as real estate, renewable energy, shipping, hedge funds, and other more specialised investments. Unlike Undertakings for Collective Investment in Transferable Securities (UCITS), which primarily focus on investments in securities such as stocks and bonds, AIOs invest in alternative assets outside traditional stock and bond markets, while UCITS invest mainly in equities, bonds, and liquidity. AIOs have more flexibility in their investment strategies and often take on higher risk.
But who are they aimed at, and what is the size of the market internationally, in Europe, and in Cyprus?
According to Maria Panayiotou, President of CIFA (Cyprus Investment Funds Association), in light of a conference in Athens with the Institutional Investors Association, “AIOs are usually aimed at institutional and more experienced and well-informed investors willing to take on higher risk for their returns. In contrast, UCITS are designed for the general public, offering relatively lower risk and better investment protection. AIOs are suitable for investors seeking more specialised investments and with a higher risk tolerance, while UCITS appeal to those looking for safer options.”
Market Size Internationally, in Europe, and Cyprus
According to data from the European Funds and Asset Management Association (EFAMA), by the end of the second quarter of 2024, investment funds worldwide managed over €70 trillion, with around 30% of that under European management. In Cyprus, Panayiotou notes, “we have achieved recognition over the past few years as a dynamic destination for investment capital and fund managers. Starting from practically zero about ten years ago, we now have over 330 licensed organisations (collective investment management companies and collective investment organisations), managing assets of more than €9 billion, most of which are categorised as Alternative Investment Fund Managers (AIFMs). This success is no accident but the result of systematic, hard work in cooperation with the supervisory authority and all involved parties. Recently, looking back on past data, I found figures from our last presentation in Athens in July 2021, towards the end of the pandemic. At that time, there were 166 active collective investment organisations, while today, there are 257, and we expect this number to keep rising.”
Cyprus’s Competitive Advantages as a Destination for Investment Funds and Asset Management Companies
“Regarding alternative investment funds (AIFs), which the recent conference in Athens focused on, Cyprus offers many general and specific competitive advantages as a destination. Key general benefits include the country’s strategic location, robust legal and tax frameworks, and the expertise of industry professionals, creating an attractive environment for international investors,” Panayiotou adds.
According to EFAMA, Cyprus ranks as the fourth highest country for cross-border investment funds, behind traditional destinations like Ireland and Luxembourg. This shows that Cyprus is a choice for many investors and fund managers due to its numerous benefits, regardless of where investments are located. For instance, an investment fund and its manager could be based in Cyprus, while funds are invested in Greece. Such a structure could be particularly attractive, given Cyprus’s advantages as a destination and the longstanding relationship between the two countries.
More specifically for AIFs, Cyprus offers flexibility regarding structure and various factors like tax management, open-ended or closed-ended funds, single or umbrella funds, and multiple asset classes and strategies. At a regulatory level, Registered Alternative Investment Funds are not required to be licensed.
