Reserved alternative investment funds (RAIFs) – a new type of AIF

The Luxembourg government approved the draft bill on a new type of AIF, the reserved alternative investment fund ("RAIF"). It’s a new type of Luxembourg AIF, i.e. a product regulation in the overall framework of the AIFMD.

It’s essentially a twin of the SIF-AIF but without the involvement of the Luxembourg supervisory commission of the financial sector (the “CSSF”).

There is hence no need for the CSSF’s approval for the launch or the amendments to the RAIF documents. Investors hence swap their increased product protection under the SIF regime for a more reduced time-to-market.

It can also be analysed as an un-regulated AIF with compartments. One could also see it as an intermediary vehicle for professional investors in a hurry to set-up a Luxembourg AIF to be subsequently converted into a regulated SIF.

The RAIF must be managed by an authorised EU-AIFM and its shares, units and interests may be distributed by way of the marketing passport to European professional investors.

The RAIF can adapt different legal forms (corporate and contractual) with no limitation as regards eligible assets or investment policies. It can have multiple compartments and multiple classes, flexible subscription, redemption and distribution features and the subscription tax of one basis point (or nil in certain circumstances).

The RAIF is hence in principle subject to risk diversification requirements.

If the RAIF restricts its investment policy to investments in risk capital, it subjects itself to the SICAR regime that does not require any risk diversification.

Next steps include the submission to Parliament with an entry into force currently scheduled for the first half-year in 2016.