Luxembourg Parliament votes on the law on Reserved Alternative Investment Fund (RAIF)

On 14 July 2016, Luxembourg Parliament voted on a new law (the ‘RAIF Law’), introducing a new type of Luxembourg investment vehicle named the ‘Reserved Alternative Investment Fund’ (RAIF). The RAIF will be regulated under Directive 2011/61/UE of 8 June 2011 on Alternative Investment Fund Managers (AIFMD) and will benefit from the corresponding European Union (EU) passport but will not be supervised by the Commission de Surveillance du Secteur Financier (CSSF), making it an attractive vehicle from a time-to-market perspective.

The introduction of the RAIF regime seeks to widen the range of investment vehicles available in Luxembourg, offering a new option to the initiators of Luxembourg AIF projects.

In order to be eligible for this new regime, the RAIF will have to be an Alternative Investment Fund (AIF) managed by an external authorised Alternative Investment Fund Manager (AIFM), both within the meaning of the AIFMD. The AIFM may be established in Luxembourg or in another Member State of the EU.

The other features of this new Luxembourg investment vehicle are substantially identical to those of the specialised investment fund (SIF) and the RAIF Law has therefore been drafted drawing heavily from the text of the Law of 13 February 2007 on specialised investment funds (the ‘SIF Law’), notably, in respect of the various legal forms (corporate (such as the public company) and contractual (such as the special limited partnership)) which are available, the absence of limitations as regards eligible assets or investment policies save for the requirement to invest in accordance with the principle of risk spreading, the possibility to have multiple compartments and multiple classes as well as flexible subscription, redemption and distribution features and, in principle, the tax regime of a taxe d’abonnement at a 0.01 per cent annual rate (or nil rate in certain circumstances). A different tax regime (similar to the one currently applicable to Luxembourg SICARs) applies if the RAIF invests exclusively in risk capital investments, in which case it will not have to invest in accordance with the principle of risk spreading.

The RAIF should become a vehicle of choice for managers and investors looking to combine contractual freedom and short time-to-market together with both the protection of the AIFMD framework and the RAIF Law, and the marketability of an investment vehicle benefiting from an EU passport.

The RAIF Law will come into force three days after its publication in the Luxembourg Gazette which is expected to occur before the end of July 2016.

More details on the RAIF can be found in our RAIF Brochure and in the full text (with an English translation) of the RAIF Law. 

For questions on the RAIF, please contact Jacques Elvinger or your usual contact lawyer at Elvinger Hoss Prussen.