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16 December 2018

RJ GAITO Transaction and Consulting News

News

Luxembourg Parliament votes into law the innovative new Reserved Alternative Investment Fund (RAIF)

Jul 14 2016

The new investment RAIF vehicle will not require the CSSF's approval for its creation and launch. Consequently, investors in a RAIF will benefit from somewhat less protection than those in a Luxembourg SIF, however the time to market for a RAIF's launch will significantly improve in comparison with that of the SIF's.

The RAIF will require an appointment of an authorised AIFM (based in Luxembourg or in another EU Member State), the AIFM will be required to ensure that the RAIF complies with all requirements of the AIFMD. 

In all other respects, the RAIF will have the same characteristics as a SIF, notably in terms of the various different legal forms (corporate and contractual) which are available for a SIF, no limitation as regards eligible assets or investment policies, the possibility to have multiple compartments and multiple classes, flexible subscription, redemption and distribution.  The SIF's tax features and the tax regime of the taxe d'abonnement at the 0.01% rate (or nil rate in certain circumstances) and, unlike the Luxembourg SOPARFI, will not be constrained by the participation exemption.

Key Feature and Advantage:

Supervision: Improved time to market

No  lengthy approval process of the Commission de Surveillance du Secteur Financier (CSSF) and which will therefore improve the time to market for fund promoters.  At the same time, an appointment of an AIFM will be required which will provide investor confidence and will enable institutional investors to comply with their own internal investment policy.

Flexible and dynamic structuring options

A RAIF will be very similar to a SIF, but even more flexible:

  • Compartments providing flexible investment structuring and bankruptcy protection
  • Diverse legal forms
  • No limitations on eligible assets
  • No limitation on investment policy and relaxed risk diversification rules

EU Passport

RAIFs will benefit from the EU passport to market its shares, interests or units throughout Europe.

Tax

The SIF's tax features and the tax regime of the taxe d'abonnement at the 0.01% rate (or nil rate in certain circumstances) unconstrained by the Luxembourg participation exemption and withholding taxes on distributions to shareholders.  The SICAR’s tax regime will apply if the RAIF is investing only in risk capital.

Entry into force

Upon publication of the RAIF Law in the Luxembourg official gazette (within a short time frame).

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