Looking Back On The First Year Of The Reserved Alternative Investment Fund (RAIF)

The Reserved Alternative Investment Fund ("RAIF"), was introduced by Luxembourg law on 23 July 2016 (the "RAIF Law").

The RAIF combines the characteristics and structuring flexibilities of Luxembourg regulated Specialised Investment Funds (SIFs) and investment companies in risk capital (SICARs), however, the RAIF is not subject to Commission de Surveillance du Secteur Financier(CSSF) approval before it is launched, nor is it subject to CSSF supervision once launched. This feature allows for a significantly reduced time-to-market for new fund launches.

The RAIF regime is reserved for AIFs which appoint a duly authorised AIFM (in Luxembourg or in any other EU Member State) as their external AIFM. The RAIF itself is therefore indirectly supervised via its authorised AIFM. A RAIF, cannot be self-managed.

At the time of its introduction, the RAIF was eagerly anticipated by participants in the Luxembourg fund industry. The reputation of the Luxembourg fund centre, which already offered many attractive fund vehicles, has sometimes suffered due to the lengthy approval process of regulated funds. Further, with the implementation of AIFMD, the SIF and SICAR vehicles managed by an authorised AIFM are subject to a double layer of supervision. The vehicles are directly supervised by the CSSF as well as indirectly, via the supervision of the AIFM. The RAIF, not being subject to the prudential supervision of the CSSF means that the fund can be launched, as well as perform updates to key documents throughout its life-cycle without prior regulatory approval, thus providing a useful addition to the Luxembourg tool kit.

It was anticipated that the RAIF would become the fund vehicle of choice for many alternative managers launching funds managed by an authorised AIFM.

The RAIF has now been around for a year and it is interesting to see that the new vehicle is already a success.

Following the introduction, the immediate uptake was modest, with around 15 RAIFs filed with the register of commerce during the first three months. The following 10 months however have seen a steady flow, with an average of just over 10 new funds being registered per month. As of 31 August this year, 158 RAIF structures have been setup and registered with the Luxembourg Trade Register.

The number of RAIFs registered per month during the first year since the introduction of the new law

The RAIFs launched to date comprise a broad range of alternative investment strategies including...