New Luxembourg Regime For Alternative Investment Funds - RAIF

1. Introduction

   Luxembourg has recently recognised that the double layer of regulation imposed at (i) the level of the alternative investment fund manager ("AIFM") and (ii) at the level of the Luxembourg alternative investment fund ("AIF") (for SIFs and SICARs) is not necessarily required when dealing with well-informed investors and that the timeto-market can accordingly be dramatically reduced by not subjecting the AIF to the prior approval and ongoing supervision of the CSSF, yet still giving the fund access to the AIFM Directive's marketing passport.

   This approach is encapsulated in a bill of law deposited with the Luxembourg Parliament on 14 December 2015 which introduces a new type of Luxembourg investment vehicle, the "Reserved Alternative Investment Fund" (the "RAIF" / the "RAIF Bill").

   The RAIF Bill is a blend of the SICAR and SIF regimes with which many are already familiar. Fund managers will thus be able to combine flexibility, quick time-to-market and the protection afforded by the AIFMD regime in one vehicle aimed at professional investors, which benefits from an EU marketing passport.

   It is anticipated that the RAIF will be available in 2016.

2. Investors: reserved to well-informed investors

   RAIF investors need to be well-informed investors, who are able to adequately assess the risks associated with an investment in such a vehicle. The RAIF Bill defines well-informed investors as (a) institutional investors, (b) professional investors, and (c) other investors who confirm in writing that they adhere to the status of wellinformed investors; and either (i) invest a minimum of 125,000 euros or (ii) benefit from an assessment made by a credit institution, an investment firm or a UCITS management company or an authorised AIFM certifying their expertise, experience and knowledge to adequately appraise the contemplated investment in the RAIF.

   Persons involved in the management of the RAIF are deemed to be well-informed investors.

3. Service providers

   3.1 The RAIF may only be managed by an external authorised AIFM established in Luxembourg, in another EU Member State or in a third country that benefits from the AIFMD passport regime (when this becomes available). The RAIF regime is therefore not available to self-managed funds nor to registered AIFMs that benefit from the de minimis exemption under the AIFMD.

   3.2 An experienced Luxembourg depositary must be appointed by the RAIF. The type of Luxembourg depositary appointed depends on...