On 27 November 2015, the Luxembourg Council of Government approved a project of law which aims at introducing a new type of alternative investment fund in Luxembourg: the so-called Reserved Alternative Investment Fund (“RAIF”).
In a nutshell, a RAIF would combine the legal and tax features of the existing Luxembourg specialised investment fund (“SIF”) and the investment company in risk capital (“SICAR”), however with the absence of a regulatory supervision.
MAIN CHARACTERISTICS OF A RAIF
- Flexibility: opportunity to adopt any fund strategy, to invest in any kind of assets and to launch multiple compartments with the absence of any risk diversification requirements if investing in risk capital;
- Unregulated entity: the new vehicle will not require, at its launch nor on an ongoing basis, the approval from the Luxembourg supervisory authority, Commission de Surveillance du Secteur Financier (“CSSF”); this would potentially entail a reduction of service provider costs (at the launch time as well as at the time of the life of the fund) and of the timeframe from set up to market of the fund;
- Status of AIF: a RAIF shall be construed as an alternative investment fund and managed by an alternative investment fund manager (“AIFM”), authorised in Luxembourg or another EU Member State pursuant to the European Directive 2011/61/UE on alternative investment fund managers as transposed in the relevant jurisdictions; the lack of direct regulation of the vehicle would basically be ‘mitigated’ by the indirect regulation of the AIFM by the competent authorities in its home Member State;
- Eligible investors and passport regime: a RAIF will therefore be addressed to professional investors; an AIFM, managing inter alia a RAIF, would be entitled to market it within the whole EU territory through the benefit of its EU passport;
- Tax regime: annual subscription tax (taxe d’abonnement) at a rate of 0.01%, or, if investing in risk capital, the tax regime applicable to the SICAR.
The Luxembourg Parliament shall now consider the above project of law. Assuming there are no delays, this new type of vehicle in Luxembourg is expected to be active for the second quarter of the year 2016.