Reserved alternative investment fund (RAIF) – behind this ungainly name hides the next big thing for the financial services sector in Luxembourg.
A RAIF will be very similar to a specialized investment fund (SIF). Indeed, a RAIF keeps the advantages of a SIF, including:
- 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 draft bill for RAIFs builds upon this existing legislation to add a new layer of flexibility to that already offered by SIFs.
The draft bill has already been approved by the Luxembourg government, and will be submitted to the Parliament with a view to rolling it out by mid next year.
As it stands currently, RAIFs will provide a legal framework which will have the benefits of an investment fund, but without falling under the supervision of the Commission de Surveillance du Secteur Financier. This will allow a quicker start-up process.
At the same time, when 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.
Furthermore, by virtue of being regulated through AIFMs, RAIFs might benefit from the EU passport to market it shares, interests or units throughout Europe.
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.
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).