The Luxembourg law on reserved alternative investment funds (RAIF) is a welcome addition to the alternative investment funds (AIF) industry and we have seen keen interest from the fund and asset management industry in this new platform. Since its introduction last summer, for the first time in Luxembourg there is the ability to set up a fund that can avail itself of the same advantages (including, crucially, the beneficial tax treatment) available to a regulated fund without the fund vehicle itself needing CSSF approval, provided that the manager is itself authorised as an EU domiciled AIFM.

1. What is the RAIF? The RAIF law introduces a new framework under which EU based AIFMs can structure a fund product. The RAIF is a Luxembourg AIF that must be managed by an authorised AIFM so whilst the manager of a RAIF will be subject to AIFMD requirements, there is no CSSF supervision of the RAIF itself.
2. Time to market Without the requirement for CSSF authorisation, a RAIF should benefit from a quicker time to market.
3. Structure Under the RAIF platform, AIFs can be set up with either fixed (closed-ended) or variable (open-ended) capital through a diverse range of Luxembourg legal forms, namely:
   1. Corporate: a private or public limited company or a co-operative constituted as a public company;
   2. Partnership: an ordinary limited partnership, special limited partnership, or an incorporated partnership limited by shares; or
   3. Contractual: a common fund.
4. Investment policy Currently there are no restrictions on a RAIF’s asset class, providing a very flexible platform for all investment strategies including private equity, real estate, hedge, public securities, commodities and, with rising popularity, debt. Nevertheless, a RAIF’s investment policy is subject to certain risk diversification requirements laid down by the CSSF.
5. The manager The RAIF must be managed by an external authorised AIFM (based in Luxembourg or elsewhere in the EU) which itself must comply with AIFMD, but must not seek exemption under the sub-threshold regime.
6. Service providers Portfolio and risk management can be delegated by the AIFM to third parties, provided of course that such delegation satisfies the delegation requirements under AIFMD. A RAIF’s depositary, auditor and its administration must be Luxembourg based.
7. Eligible investors Investment in a RAIF is reserved for ‘well informed investors’ as defined in the RAIF law (which includes institutional investors, professional investors and those investors that either invest a minimum of EUR 125,000 or investors certified by an investment firm, credit institution, or management company).
8. Tax RAIFs are subject to a subscription tax (the tax d’abonnement), currently at 1bp of the RAIF’s net asset value but exempt from Luxembourg taxes on income and capital gains.
9. Marketing Passport EU-cross border marketing through the EU passport is automatically at the disposal of the RAIF given the involvement of a licensed AIFM, albeit that investors must qualify as ‘professional investors’ under AIFMD.
10. Compartmentalisation Under the RAIF Law, the intended structure can be set up with multiple compartments, with each compartment’s assets and liabilities protected from the other and each with its own investment policy.