The first in our on-going series of fund manager roundtables looked at the latest in fund structuring technology in France and Luxembourg. We have picked out highlights below.

Luxembourg’s RAIF – what is it good for?

What is a RAIF?

The “Reserved AIF” is a relative newcomer to the Luxembourg fund vehicle scene. Suitable for most alternative asset classes, it is basically an unregulated version of the existing SIF, although the manager of a RAIF must still be regulated under AIFMD.

The RAIF will probably not supplant the trusty SIF, because some investors prefer the double layer of regulation (supervision of both the manager and the fund).

When would you choose a RAIF?

You should consider a Luxembourg RAIF if you:

  • have chosen Luxembourg for your fund vehicle (e.g. you are targeting EU investors); and
  • don’t want to wait 3/6 months for a green light from the CSSF (i.e. you want to set up quickly); and/or
  • want an umbrella structure with compartments following different strategies; and
  • regulation of the manager under AIFMD is enough for your investors (i.e. they don’t want the fund to be overseen by the CSSF as well).

French vehicles – the OPCI and the SLP

OPCI – designed for real estate

The Organisme de placement collectif en immobilier is the most popular French real estate investment vehicle. It is designed specifically for holding real estate assets and has a specific, favourable tax regime. Usually formed as a SPPICAV (retail friendly) or SPPPICAV (professional only), they are designed for buy and hold rental strategies with a minimum five year holding period. They have a similar income distribution obligation to the UK’s PAIF and REIT vehicles, are always AIFs, and have a leverage limit of 80% AUM (40% for the retail version).

SLP – Macron’s flexible fund vehicle

France’s ‘special limited partnership’ has rapidly become a very popular and flexible fund vehicle, since its introduction by M. Macron during the Hollande administration. It is not as well suited to a traditional, core, buy to hold real estate fund portfolio as the OPCI because it does not have a special real estate specific tax regime. However, it is still tax transparent and has many interesting features as a fund vehicle. It is a corporate vehicle with legal personality, that offers limited liability for investors and is managed by a general partner. In essence, you could describe the SLP as similar to a UK LLP, only with a general partner. It needs to be registered, but beyond that, it is a very private professional investor vehicle with no diversification requirements, no real investment restrictions, an option to create compartments, and the all-important tax transparency for investors. Perhaps the flexible and modern SLP offers further clues about President Macron’s broader priorities…