Reserved Alternative Investment Fund (RAIF) Law Passed In Luxembourg

The Reserved Alternative Investment Fund law has entered the Luxembourg legal and regulatory environment, with short time-to-market and no requirement for Luxembourg regulatory approval or supervision.

The RAIF (Reserved Alternative Investment Fund) law has entered the Luxembourg legal and regulatory environment, with a short time-to-market and no requirement for Luxembourg regulatory approval. The Luxembourg funds industry can now offer, on short notice, a product that is not subject to supervision by the Commission de Surveillance du Secteur Financier (CSSF), with full fund flexibility.

This product is unprecedented in the market. RAIF law combines the advantage of the existing regulated fund regime with segregation of risk, and fast implementation. The RAIF law makes use of well-known criteria regarding eligible investors, pass porting and a tax regime from the existing SIF and SICAR regimes.

Required service provider and regulation

The RAIF is required to appoint an alternative investment fund manager (AIFM) who manages the fund within the EU-compliant AIFMD. The fund must also appoint a depositary, central administrator, transfer agent based in Luxembourg and a Luxembourg statutory auditor. There is no change to the regime of a SIF or a SICAR.

Assets and investment restrictions

The RAIF structure can make use of multiple compartments and classes of shares. There is no limitation on asset classes or investment policies. In principal, the 30% risk diversification after a defined setup period applies to RAIFs as used in the SIF regime. A clear definition of an investment policy into risk capital within the incorporation documents/prospectus/private placement memorandum, would allow a deviation from the 30% rules.

Eligible investor and tax regime

Institutional, professional and well-informed investors with a minimum...