Combining many of the features of the SIF and SICAR regimes, the RAIF (reserved alternative investment fund or fonds d’investissement alternatif réservé) is Luxembourg’s investment vehicle that offers legal structuring and investment flexibility.
Luxembourg introduced the RAIF in July 2016, in order to increase its attractiveness for investment funds and asset management, and since, it has lived up to expectations.
Features of the RAIF
| Luxembourg RAIF | Luxembourg’s investment vehicle that can invest in all asset classes and investment strategies. |
| Applicable legislation | RAIFs are subject to the Luxembourg Law of 23 July 2016 (the RAIF Law) |
| Eligible investors | The RAIF is restricted to “well-informed” investors who can assess the risks associated with it (These are institutional investors, professional investors and investors who have confirmed in writing that they grasp the “well-informed” investor status). |
| Eligible assets | The RAIF can invest in any eligible alternative asset. |
| Risk diversification requirements | The RAIF must respect a 30% diversification threshold. There are, however, no risk diversification rules for RAIFs that invest exclusively in ‘risk capital’ investments. |
| Legal Form | A RAIF may be created under either 1. a contractual ‘common fund’ form (FCP), 2. a corporate legal form like a public or private limited liability company (S.A. or S.à. r.l.), 3. a corporate partnership restricted by shares (SCA) or 4. a partnership form (SCS or SCSp/Special Limited Partnership), either with variable or fixed capital (SICAV or SICAF). |
| Segregated compartments | Yes (RAIF allows for diversification, consisting in an “umbrella” fund with several compartments) |
| Capital requirements | The RAIF Law states that the RAIF’s net assets should reach a minimum of EUR 1,250,000 within twelve months after its establishment |
| Net asset value (NAV) calculation and redemption policy | At least once a year for reporting purposes. |
| Tax regime | RAIF is subject to an annual subscription tax of 0.01% on the Net Asset Value of the fund (with some exemptions available) and are exempted from Municipal Business taxes, wealth tax, Corporate Income taxes, and Net Income taxes. |
| Authorisation and supervision by the CSSF | No. RAIF is an unregulated fund and is not subject to the initial approval nor the supervision of the Luxembourg Financial Supervisory Authority (CSSF) |
| European passport | RAIF benefits from the European Passport, enabling all businesses invested in the fund to be marketed in all EU-countries; |
| Possibility of listing | Yes |
| Double Tax Treaties | RAIFs organised under a SICAV or SICAF may have access to the Double Tax Treaties concluded by Luxembourg. RAIFs established as FCPs or partnerships have no access to Double Tax Treaties. But, investors might claim the benefits of tax treaties. |
| Required Luxembourg service providers | – Management Company – a duly authorised AIFM – a depositary (subject to the AIFMD liability regime) – a statutory auditor – Registrar and Transfer Agent |
Up to now, the RAIF tops the list of the most prominent investment fund among investors and savers in Luxembourg. And its popularity depends on the benefits listed below.
- It can be formed in a very short time
- RAIF does not need the approval of CSSF for being established.
- It has the same flexibility proposed by Special Investment Funds (SIF) and Capital Risk Funds (SICAR).
- It has access to an EU marketing passport.
- It comes with structuring flexibility in addition to the AIFMD quality seal (transparency, risk management, and independent valuation).
Luxembourg is the world’s second-largest fund domicile after the USA, and in respect of this, there are numerous structures available for different types of investment fields.
To set up your investment fund in Luxembourg, let’s go ahead and contact your Damalion expert now.
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