The Luxembourg government has today adopted a new draft bill of law concerning reserved alternative investment funds (RAIF) or fonds d’investissement alternatif réservés (FIAR). This follows the modernisation of the Luxembourg limited partnership two years ago and aims at further increasing Luxembourg’s competitiveness in the field of alternative investment fund solutions.
RAIFs will provide further options to the managers of Luxembourg based alternative investment funds (AIFs) who currently structure their vehicles either as regulated SICARs, SIFs and UCIs or, in some circumstances, as unregulated companies or partnerships. The RAIF would be a hybrid between the SIF and SICAR regimes as regards its operational flexibility (including, but not limited to, the legal forms available, the possibility to launch multiple compartments and the type of eligible asset classes) and tax efficiency, with the two most significant differences being:
- a RAIF may be set up without the prior authorisation of the CSSF and will not be subject to any direct prudential supervision; and
- only alternative investment funds within the meaning of the alternative investment funds managers directive (AIFMD) can be organised under the RAIF regime and they must appoint an authorised alternative investment fund manager (AIFM) established in Luxembourg, another country of the European Union or, upon the AIFMD distribution passport becoming available to third countries, in a third country according to the provisions of the AIFMD.
To the extent a RAIF provides in its constitutional documents that its corporate object is restricted to investment in risk capital, it will not be subject to any risk diversification requirement and its tax regime will mirror the one currently applicable to SICARs.
Following the adoption of the draft bill by the government, the legislative process can start and a final vote on the bill could be expected to occur during 2016.