The long awaited Reserved Alternative Investment Fund (RAIF) law (the RAIF Law) was voted in yesterday.
Supervision: Enhanced time to market
The RAIF Law provides a legal framework which has the benefits of an alternative investment fund, but without falling under the supervision of the Commission de Surveillance du Secteur Financier (CSSF) and which will therefore reduce the time to market.
At the same time, as an authorised alternative investment fund manager (AIFM) is being appointed by a RAIF, it will ensure that these type of funds will not be totally un-regulated, and this is likely to boost the confidence of potential investors.
A RAIF will be very similar to a specialized investment fund (SIF). Indeed, a RAIF keeps the advantages of a SIF, notably:
- Creation of compartments
- EU passport for marketing its interest, shares or units
- Full flexibility of legal forms
- No limitation in terms of investment policy
The SIF law was first introduced in 2007 and has been extremely successful in streamlining the rules around establishing investment fund structures, as well as providing a means to ensure that SIFs are registered.
However, the RAIF law builds upon this existing legislation to add a new layer of flexibility to that already offered by SIFs.
Contrary to SIFs (and provided it does invest in risk capital as per the law), RAIFs will not have to comply with the risk diversification requisite. In all other cases, these funds will have to follow the diversification risk obligations.
Furthermore, by virtue of being regulated through AIFMs, RAIFs might benefit from the EU passport to market its shares, interests or units throughout Europe.
Entry into force
The determination of the exact date of its entering into force depends on the date of publication of the RAIF Law in the Luxembourg official gazette, which is currently not determined (it is foreseen to be in force before end of this month).
From a tax standpoint, RAIFs will follow the SIF regime and will incur only the subscription tax (taxe d’abonnement) of 1bps (or none, if the alternative investment fund benefits from the exemptions). The SICAR’s tax regime will apply if the RAIF is investing only in risk capital.