The Reserved Alternative Investment Fund law has entered the Luxembourg legal and regulatory environment, with short time-to-market and no requirement for Luxembourg regulatory approval or supervision.

The RAIF (Reserved Alternative Investment Fund) law has entered the Luxembourg legal and regulatory environment, with a short time-to-market and no requirement for Luxembourg regulatory approval. The Luxembourg funds industry can now offer, on short notice, a product that is not subject to supervision by the Commission de Surveillance du Secteur Financier (CSSF), with full fund flexibility.

This product is unprecedented in the market. RAIF law combines the advantage of the existing regulated fund regime with segregation of risk, and fast implementation. The RAIF law makes use of well-known criteria regarding eligible investors, pass porting and a tax regime from the existing SIF and SICAR regimes.

Required service provider and regulation

The RAIF is required to appoint an alternative investment fund manager (AIFM) who manages the fund within the EU-compliant AIFMD. The fund must also appoint a depositary, central administrator, transfer agent based in Luxembourg and a Luxembourg statutory auditor. There is no change to the regime of a SIF or a SICAR.

Assets and investment restrictions

The RAIF structure can make use of multiple compartments and classes of shares. There is no limitation on asset classes or investment policies. In principal, the 30% risk diversification after a defined setup period applies to RAIFs as used in the SIF regime. A clear definition of an investment policy into risk capital within the incorporation documents/prospectus/private placement memorandum, would allow a deviation from the 30% rules.

Eligible investor and tax regime

Institutional, professional and well-informed investors with a minimum subscription amount of €125,000 can enter the RAIF. The RAIF can freely use flexible subscription/redemption and distribution elements as within the SIF or SICAR regimes.

In any case, RAIFs are subject to a 0.01% annual subscription tax. On an umbrella fund level, a tax regime (SIF or SICAR) must be chosen, and is applicable for all compartments. Making use of the SIF route, the RAIF would not be subject to any other tax.

If your incorporation documents/prospectus/private placement memorandum foresees capital at risk investment, you enter into the SICAR tax regime. This includes corporate income tax and municipal business tax, as well as net wealth tax.

Talk to us

TMF Fund Services (Luxembourg) S.A. provides the full range of services required for an alternative investment asset manager to operate a RAIF; such as central administration, transfer agency and depositary services. Our senior business leaders have 15 years' experience in the alternative investment industry, providing stability and sound market knowledge. We have strong experience with SICAR and SIF, making us the ideal partner to discuss your RAIF needs.

We are experts in alternative investment funds, understanding investor needs and following your business plan globally.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.