Christoph Lanz, what exactly is the RAIF (Reserved Alternative Investment Fund) that has just been adopted by Luxembourg’s Chambre des députés?
The RAIF is a new type of fund, which extends the range of high-end instruments available to investors in Luxembourg. Eagerly awaited by professionals, the RAIF was approved by the government last November. The features of the RAIF are very similar to those of the now well-known SIF (Specialised Investment Fund), which means in particular that it is only available to institutional and professional investors, and other qualified investors. Furthermore, it integrates certain elements of the SICAR (Venture Capital Investment Company) law, which means that it may be exempt from diversification rules subject to certain venture capital investment conditions.
What are the key differences with the SIF?
Unlike the SIF, the RAIF is not subject to CSSF (Commission de Surveillance du Secteur Financier) authorisation and supervision. This means in practice that a RAIF can be launched once all the various service providers, such as the Alternative Investment Fund Manager (AIFM) and the depositary, have given the green light. It also means that, for example, RAIF sub-funds can be launched without the regulator’s prior approval, and prospectus changes are simply conditional on sign-off by the parties involved and formal adoption by the RAIF’s governing bodies. However, a RAIF must always be managed by an authorised (and not just registered) AIFM, which itself is subject to regulatory approval and supervision. Ultimately, this means that the RAIF is not regulated directly, but indirectly through reliance on fully supervised service providers (notably the AIFM, the depositary and the auditor).
What advantages does the RAIF offer?
Given the lack of a prior approval process by the CSSF, a RAIF can be set up much faster than a SIF. Therefore, time-to-market is significantly improved. We also expect that the fund setting-up cost will fall significantly, notably as regards legal fees. Another advantage lies in the fact that a RAIF can be converted into a SIF if circumstances require. Lastly, the RAIF is fully compliant with the AIFM Directive. It therefore benefits from an EU-wide distribution passport. Furthermore, it can be managed by a foreign AIFM on a cross-border basis.