Answer ... Certain investment restrictions stem from the applicable product laws, such as the Société d’Investissement en Capital à Risque (SICAR) Law, the Specialised Investment Funds (SIF) Law and the Reserved Alternative Investment Fund (RAIF) Law. However, the AIFs may provide for additional investment restrictions in their constitutive documents.

Borrowing restrictions may apply in light of the leverage requirements under the Alternative Investment Fund Managers (AIFM) Law. AIFMs must set a maximum level of leverage, which shall be calculated pursuant to the gross method and the commitment method. Indeed, the definition of ‘leverage’ under the AIFM Directive includes borrowing, since ‘leverage’ is defined as “any method by which the AIFM increases the exposure of an AIF it manages whether through borrowing of cash or securities, or leverage embedded in derivative positions or by any other means”.

Answer ... The SICAR Law provides that a SICAR must invest its funds in assets representing risk capital. ‘Investment in risk capital’ is defined as the direct or indirect contribution of assets to entities in view of their launch, development or listing on the stock exchange.

A SIF may invest in any asset class, but is subject to a risk-spreading requirement pursuant to which it may not invest more than 30% of its assets or commitments in securities of the same type issued by the same issuer.

A RAIF may invest in any types of assets, subject to compliance with the risk-spreading requirement, unless by way of derogation it elects to invest exclusively in risk capital.