The Luxembourg law on reserved alternative investment funds
(RAIF) is a welcome addition to the alternative
investment funds (AIF) industry and we have seen
keen interest from the fund and asset management industry in this
new platform. Since its introduction last summer, for the first
time in Luxembourg there is the ability to set up a fund that can
avail itself of the same advantages (including, crucially, the
beneficial tax treatment) available to a regulated fund without the
fund vehicle itself needing CSSF approval, provided that the
manager is itself authorised as an EU domiciled AIFM.
What is the RAIF? The RAIF law introduces a new framework under which EU
based AIFMs can structure a fund product. The RAIF is a Luxembourg
AIF that must be managed by an authorised AIFM so whilst the
manager of a RAIF will be subject to AIFMD requirements, there is
no CSSF supervision of the RAIF itself.
Time to market Without the requirement for CSSF authorisation, a RAIF
should benefit from a quicker time to market.
Structure Under the RAIF platform, AIFs can be set up with either
fixed (closed-ended) or variable (open-ended) capital through a
diverse range of Luxembourg legal forms, namely:
Corporate: a private or public
limited company or a co-operative constituted as a public
Partnership: an ordinary limited
partnership, special limited partnership, or an incorporated
partnership limited by shares; or
Contractual: a common fund.
Investment policy Currently there are no restrictions on a RAIF's asset
class, providing a very flexible platform for all investment
strategies including private equity, real estate, hedge, public
securities, commodities and, with rising popularity, debt.
Nevertheless, a RAIF's investment policy is subject to certain
risk diversification requirements laid down by the CSSF.
The manager The RAIF must be managed by an external authorised AIFM
(based in Luxembourg or elsewhere in the EU) which itself must
comply with AIFMD, but must not seek exemption under the
Service providers Portfolio and risk management can be delegated by the AIFM
to third parties, provided of course that such delegation satisfies
the delegation requirements under AIFMD. A RAIF's depositary,
auditor and its administration must be Luxembourg based.
Eligible investors Investment in a RAIF is reserved for 'well informed
investors' as defined in the RAIF law (which includes
institutional investors, professional investors and those investors
that either invest a minimum of EUR 125,000 or investors certified
by an investment firm, credit institution, or management
Tax RAIFs are subject to a subscription tax (the tax
d'abonnement), currently at 1bp of the RAIF's net
asset value but exempt from Luxembourg taxes on income and capital
Marketing Passport EU-cross border marketing through the EU passport is
automatically at the disposal of the RAIF given the involvement of
a licensed AIFM, albeit that investors must qualify as
'professional investors' under AIFMD.
Compartmentalisation Under the RAIF Law, the intended structure can be set up
with multiple compartments, with each compartment's assets and
liabilities protected from the other and each with its own
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.
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