In the first two parts of this series, we looked at Luxembourg’s unregulated and regulated investment vehicles. In this final part, we turn to the third category: indirectly regulated vehicles, whose supervision by the Commission de Surveillance du Secteur Financier (CSSF) operates not at the level of the fund itself, but at the level of its manager.
The RAIF (Reserved Alternative Investment Fund)
The flagship of this category is the RAIF (fonds d’investissement alternatif réservé), introduced by the Law of 23 July 2016. The RAIF itself requires no CSSF authorisation and is not subject to its ongoing supervision; instead, it must appoint an authorised external alternative investment fund manager (AIFM) established in Luxembourg or another EU Member State. Regulation is thereby applied indirectly, through the AIFM, which remains fully subject to the AIFMD regime.
Key features:
Eligible investors
Like the SIF and SICAR, the RAIF is reserved for well-informed investors (investisseur averti). Besides institutional and professional investors, this also includes private individuals and other investors who declare in writing — typically in the subscription agreement — that they adhere to the status of well-informed investor; for them, the minimum investment is 100,000 EUR. A smaller investment is possible only if a credit institution, investment firm, management company or authorised AIFM certifies in writing that the investor has the expertise, experience and knowledge to adequately appraise the contemplated investment.
Investment policy
A RAIF may invest in any asset class subject to the principle of risk spreading (mirroring the SIF regime, as a rule no more than 30% of assets in a single investment), or it may opt to invest exclusively in risk capital (mirroring the SICAR regime), in which case no risk diversification is required.
Legal forms and capital
The RAIF may be set up in contractual form (FCP) or corporate form (SICAV/SICAF), using the company forms described in Part 1 – in practice most often the SCSp or SCA. The minimum capital of 1,250,000 EUR must be reached within 24 months. Umbrella structures with segregated compartments are available.
Speed to market and passport
As no CSSF approval is needed, a RAIF can be launched within a few weeks – incorporation before a Luxembourg notary and registration on the RAIF list held by the Luxembourg Business Registers. Through its AIFM, it benefits from the AIFMD passport, allowing marketing to professional investors across the entire European Union.
It is also worth recalling that a similar logic extends to the unregulated vehicles discussed in Part 1: where such a vehicle qualifies as an AIF and is managed by an authorized AIFM, it too gains access to the EU marketing passport. The choice between an unregulated structure, a RAIF and a fully regulated fund is therefore ultimately a trade-off between speed, cost, investor expectations and distribution needs.
This concludes our three-part overview of Luxembourg investment vehicles. If you want to learn more about the different investment vehicles in Luxembourg or to set up your investment fund, reach out us via email (office@bensonformations.com) or give us a call (+44 20 3974 1244) at any time.
