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RAIF: Luxembourg’s innovative breed of Alternative Investment Funds
RAIF: Luxembourg’s innovative breed of Alternative Investment Funds

RAIF: Luxembourg’s innovative breed of Alternative Investment Funds


Jean-Florent Richard

Jean-Florent Richard

Head of Fund Engineering Services

BNP Paribas Securities Services

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A new innovation in Luxembourg's alternative fund structure range

A new innovation in Luxembourg’s alternative fund structure range is coming to market: the Reserved Alternative Investment Fund (RAIF). This new investment fund structure will expedite time‑to‑market, meaning asset managers can set‑up their fund project in a shorter timeframe.

The bill on RAIFs proposes a move from a double layer of authorisation and supervision to a single layer via the AIFM. Indeed, RAIFs will not be subject to prior approval and supervision by the Luxembourg supervisory authority, the Commission de Surveillance du Secteur Financier (CSSF). Furthermore, the RAIF is built on features of the successful and well‑established Specialised Investment Fund (SIF) and Investment Company in Risk Capital (SICAR) regimes.

“The major benefit over existing vehicle options will be time-to-market” says Jean-Florent Richard, Head of Legal Fund Engineering, BNP Paribas Securities Services, Luxembourg Branch. “RAIFs can also take advantage of the structuring flexibilities of both the successful limited partnership and SIF regimes, which makes it an eagerly anticipated and welcome development.”

Double authorisation and supervision layer

Under the current regulatory regime in Luxembourg, when alternative investment funds (AIFs) are subject to a product law, compliance with product rules is consequently ensured at two levels: at the level of the AIF itself and at the level of the AIFM. Moreover, such AIFs are subject to a double supervision by the CSSF and the supervisory authority of their AIFM. This is the case, among others, for SIFs and SICARs governed by the product laws of 13 February 2007 and 15 June 2004.

“The AIFMD focuses on supervising the managers themselves, rather than the products they manage,” explains Mr. Richard. “The AIFMD introduced the concept of non-regulated alternative investment funds in the Luxembourg framework, but which can still benefit from the EU marketing passport of the fully AIFMD-compliant AIFM appointed to manage them. “Since Luxembourg AIFs are restricted to institutional, professional and well-informed investors, this double layer of authorisation and supervision may be considered unnecessary, given the target market is well-qualified to assess the risks,” he adds. “The AIFMD’s legal and regulatory framework should be sufficient to give these types of investors all the comfort they need.”

Furthermore, once the AIFMD’s marketing passport is extended to non-EU AIFMs, potentially in 2018, the incidence of investment funds not subject to a dual supervisory system will become much more common. “The legislator wants to be prepared, because from that date, Luxembourg will be in competition with jurisdictions that do not require such a double layer of authorisation and supervision,” notes Mr. Richard.

Building on LP regime success

Recognising the shift in regulatory focus towards manager supervision under the AIFMD, Luxembourg has already taken the opportunity to improve its investment vehicles toolkit and enhance its competitiveness by updating the rules on limited partnerships (LPs). This entailed revamping the common limited partnership regime (referred to as société en commandite simple (SCS)), and introducing a new limited partnership without legal personality (the société en commandite spéciale (SCSp)). SCSs and SCSps can be used for both regulated and non‑regulated investment vehicles.


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The law on Reserved Alternative Investment Funds, dated 23 July 2016, came into force on 1 August 2016.

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