On 14 July 2016 Luxembourg added the eagerly awaited Reserved Alternative Investment Fund (RAIF) to its alternative investment fund structuring toolbox.

The new RAIF is very familiar as it borrows interesting features from both the SIF and the SICAR regimes. The investments must respect the same risk-spreading rules as the SIF (a maximum 30% in any asset) except if the RAIF invests solely in Risk Capital in which case the RAIF can invest up to 100% in one asset. However, unlike the SIF and the SICAR, the RAIF is not subject to any approval or ongoing supervision by the CSSF. Investor protection is built on the premise that only authorised AIFMs will be allowed to establish and manage the RAIF giving investors a high level of protection and transparency through the rules that the AIFM has to respect. We expect the RAIF to be particularly appealing to sophisticated investors who are looking for a robust structure to quickly seize investment opportunities and who are comfortable with the regulation of the Manager without direct regulation and supervision of the Fund.

The RAIF's most interesting characteristics are as follows:

  • Structuring flexibility: the RAIF can be set up as a partnership, an investment company, or a contractual fund, either as a stand-alone or umbrella fund and with the possibility to set up several share classes.
  • Access to the AIFM marketing passport: the RAIF can be managed by an authorised AIFM established in any EU Member State or in a third country qualifying for a future AIFM passport regime, with access to a marketing passport for professional investors across the EU.
  • Taxation: the RAIF will be subject to a subscription tax of 0.01% of NAV, with exemptions available for certain Money Market Funds, for funds dedicated to pension fund investors, and for microfinance funds. RAIFs that invest exclusively in Risk Capital will be subject to income tax with exemptions for income derived from transferable securities.
  • Transparency to investors: the RAIF must issue an Offering Document that satisfies the AIFMD transparency requirements. It must also produce an annual report audited by an Approved Statutory Auditor, within six months of year-end.
  • The RAIF is able to be converted into a SIF or a SICAR.

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.