The Luxembourg government plans to introduce a new alternative investment fund (AIF) – the Reserved Alternative Investment Fund (RAIF) – which was presented in draft law to the Parliament on Monday, December 14, 2015. It is expected to 'go live' in Q2 2016, if approved.
The RAIF is modeled on Luxembourg's specialized investment fund (SIF), and maintains several elements of SIF including creation of compartments EU passport for marketing its interest, shares or units, full flexibility of legal forms and no limitations in terms of investment policy.
However, the RAIF will not require prior approval or supervision from the Commission de Surveillance du Secteur Financier (CSSF), provided that it complies with AIF requirements and is managed by a regulated Alternative Investment Fund Manager (AIFM). RAIFs can therefore be set up within days, ensuring greater efficiency and speed to market.
Regulated as it will be through an AIFM, the RAIF can also take advantage of the EU passport to market itself throughout Europe.
"This new RAIF structure adds to an existing range of Luxembourg investment fund products that are respected by investors worldwide. It will allow DMS clients to use its AIFM to set up a flexible investment vehicle with reduced time to market. We are preparing for significant interest in this product, even ahead of the legislation being passed," states DMS Luxembourg's Executive Director Nicholas Parkes.
RAIF: Key Provisions
- The RAIF qualifies as an AIF.
- Must be managed by an external AIFM established in Luxembourg or another EU member state.
- The AIFM must ensure compliance with the Alternative Investment Fund Managers Directive (AIFMD).
- Registered office and administration must be in Luxembourg.
- Luxembourg depositary required and an auditor appointed.
- An AIFM must notify regulatory authorities once it starts to manage a RAIF.
- The RAIF can follow any investment strategy and invest in any type of asset, subject to the requirement of 'risk spreading'.
Next Steps
The RAIF draft law will be subject to review and discussion by the Luxembourg Parliament, with a final decision expected by mid-2016.
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