On November 27th 2015 the Luxembourg Council of Government approved the draft law relating to Reserved Alternative Investment Funds (the “Draft Law”). The Draft Law was then approved by the chamber of deputies on December 14th 2015 and published on December 15th 2015. The next steps will be the approval of the Draft Law by the Luxembourg Parliament which is expected to be done smoothly at the beginning of 2016 with the new law ideally entering into force during the second quarter of 2016.
RAIFs are unregulated alternative investment funds, similar to specialised investment funds, which will have to appoint an authorised alternative investment fund manager (“AIFM”). RAIFs are designed to avoid a second layer of supervision at the level of the fund. Some investors feel that the level of regulatory supervision that comes with the appointment of an authorised AIFM already gives enough comfort.
"The Luxembourg legislature wishes to provide promoters with the possibility to create an investment vehicle swiftly without burdening it with further supervision requirements."
The idea is to provide Luxembourg with a flexible unregulated vehicle which does not need to go through the steps necessary to obtain CSSF authorisation and is not subject to on-going supervision requirements but, at the same time may be marketed by its authorised AIFM in other European jurisdictions. The units of a RAIF are restricted to well-informed investors, similar to a SIF or a SICAR.
A. Rules Applicable to RAIFs
RAIFs will not be subject to CSSF supervision. They will not go through the process of authorisation that regulated vehicles undergo.
RAIFs should appoint an authorised AIFM in Luxembourg or abroad.
RAIFs may be fiscally treated as SIFs (i.e. subject only to an annual subscription tax of 0.01% depending on their investment policy) if they respect the risk diversification limits applicable to SIFs. RAIFs may be fiscally treated as SICARs if they invest in risk capital. In that case RAIFs will not be subject to any risk diversification limits.
RAIFs should appoint a Luxembourg based central administrative agent, depositary bank and an external auditor.
RAIFs may be constituted with multiple compartments, each compartment corresponding to a distinct part of the assets and liabilities of the RAIF. As with SIFs and SICARs the assets and liabilities relating to one compartment are ring fenced from assets and liabilities relating to other compartments unless expressly stated otherwise.
RAIFs may be established as investment companies with variable share capital or with fixed share capital or mutual funds (fonds commun de placement).
B. Marketing passport
The AIFM of a RAIF shall be able to market the units or shares of that RAIF to professional investors in its home Member State. Such AIFM shall also be able to market the units or shares of that RAIF to professional investors in Member States other than the home Member State of the AIFM upon complying with the same type of notification procedure as is applicable to AIFs pursuant to the AIFMD.
The creation of a new investment fund framework has been conceived to facilitate the set-up of alternative investment funds and to respond to the needs of promoters, without the disadvantages of being subject to supervision and regulation by the CSSF.