The law of July 23, 2016 introduced a new Luxembourg investment fund regime, the Reserved Alternative Investment Fund.
The RAIF offers alternative investment fund managers based in Luxembourg and elsewhere in the EU a fund-structuring solution that ishighly attractive for all types of alternative (non-UCITS) investment strategies. The RAIF can invest in any asset class, including private equity, real estate, infrastructure, debt acquisition and loan origination, as well as listed securities of any type. It can be closed-ended or open-ended, leveraged or unleveraged.
Key features of the RAIF regime
Legal structuring flexibility
All Luxembourg corporate, partnership and contractual legal forms are available:
- partnerships: common limited partnership (société en commandite simple - SCS), special limited partnership (société en commandite spéciale - SCSp), or partnership limited by shares (société en commandite par actions - SCA)
- corporate entities: public limited company (société anonyme - SA), private limited company (société à responsabilité limitée - S.àr.l.), cooperative structured as a public limited company (société coopérative organisée comme une SA - SCOSA)
- contractual form: common fund (fonds commun de placement - FCP)
A RAIF may opt for an open-ended structure and can adopt an umbrella structure with multiple compartments or sub-funds. The risk-spreading requirements are the same as those applicable to SIFs, unless the RAIF invests only in qualifying risk capital investments, in which case the risk-spreading requirements do not apply.
RAIFs are available to well-informed investors, a category including institutional investors, professional investors and investors of a minimum €125,000 or who qualify under other criteria.
RAIFs are not subject to CSSF supervision
Unlike a SIF or SICAR, a RAIF is not subject to prior authorisation or ongoing prudential supervision by the CSSF. A RAIF must be registered with the Luxembourg Trade and Companies’ Register within 10 days of its establishment.
Authorised AIFM must be appointed
A RAIF automatically qualifies as an AIF and must designate an authorised AIFM established in Luxembourg, in another EU member state, or in a non-EU country as and when the AIFMD management passport becomes available to third-country managers.
RAIFs are subject either to an annual subscription tax (taxe d’abonnement) on its assets at a rate of 0.01%, subject to various exemptions, or to the tax regime applicable to SICARs, which are fully subject to tax except for qualifying risk capital income and gains. The VAT exemption on AIF management services also applies.
Existing SIFs, SICARs and unregulated AIFs may elect to adopt the RAIF regime, subject to approval from investors and, where applicable, the CSSF.
Luxembourg's ingredients for success
With 40% of AIFs marketed on a cross-border basis, according to the European Commission, the selection of the appropriate investment fund domicile is crucial. As Europe’s largest fund domicile, Luxembourg not only offers distribution opportunities across Europe, but also globally, in an environment characterised by a proven ability to connect managers and investors, stability and predictability, as well as a solid yet flexible legal, regulatory and fiscal framework - fundamental to any long-term project. The country continues to meet the challenge of providing the international fund industry with a recognised and solid structuring framework, proactively renewed with steady innovation.
In the past, Luxembourg's AIF structuring solutions have often been criticised by fund promoters over time to market, an issue that has been been answered directly by the introduction of the RAIF. While eliminating the risk of supervisory delays, the RAIF upholds regulatory standards developed at the highest level over the past 25 years to safeguard investors’ interests. As a result, Luxembourg RAIFs are increasingly viewed as an alternative to establishing alternative funds in the Cayman Islands, the British Virgin Islands or Delaware, thanks to their three key ingredients of compatibility with EU regulations, global marketing reach and rapid time to market.
Please click on the document below to download our RAIF brochure.