Simon Bodjanski Talks Luxembourg RAIFs And Brexit's Impact On Funds

In a Q&A with Real Deals, TMF Group's Simon Bodjanski discusses why Luxembourg's RAIF fund regime has been so popular with fund managers, how Brexit is influencing GP decision-making and the role technology can play in managing increasing regulation and compliance.

Luxembourg introduced its RAIF fund regime in 2016, and the structure has proven incredibly popular with fund managers since launch. What was the thinking behind the launch and why has uptake been so enthusiastic?

Luxembourg has always been a jurisdiction best known as a domicile for UCITS funds, but it has made remarkable progress to develop its alternative assets offering. It first introduced the SICAR, SIF and Simplified Partnership structures and now the Reserved Alternative Investment Fund (RAIF) is in place.

What the RAIF does is focus on regulating the management company rather than focus on regulating the underlying funds. It can take between eight and nine weeks to get the green light for a new fund from regulators - under the condition that all filing documents have been properly produced and defined - but under the RAIF a regulated alternative investment fund (AIF) manager can proceed to launch funds without each vehicle requiring a long sign off process from the regulator. Putting the responsibility on the manager rather than the fund streamlines the process materially.

The regulatory scrutiny the alternative assets industry faces will only go up and Luxembourg has always looked for ways to adapt to increasing regulation by creating structures that are flexible and help to control compliance costs.

Do GPs then have to set up their own AIF management companies if they want to domicile their funds in Luxembourg under the RAIF?

Many GPs will go down that route, particularly those who are managing a number of funds. There are also, however, third-party AIF managers who oversee a portfolio of funds from different managers. It gives private equity managers more choice and flexibility.

Anyone visiting Luxembourg will notice how fast the Grand Duchy is growing and how busy it has become. What do you put this down to?

The area has undergone a large transformation. I arrived here 16 years ago and it was quieter. That has changed significantly. There is so much more activity here and the vibe is totally different now. The financial services industry has expanded and is more sophisticated. As fund managers have come to Luxembourg they have built up genuine operational substance...