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RAIF Law voted by the Luxembourg Parliament

27th Jul 2016

The Law on the reserved alternative investment fund (RAIF) or “fonds d’investissement alternatif réservé” (FIAR) was adopted on July 14th 2016 by the Luxembourg Parliament (the RAIF Law).

Benefits of using a RAIF

The RAIF vehicle will combine the characteristics and structuring flexibilities of Luxembourg regulated specialised investment funds (SIFs) and investment companies in risk capital (SICARs) as AIFs managed by an authorised AIFM, except that RAIFs will be non-regulated investment funds.

The RAIF will not be subject to prior authorisation by the CSSF before it can be launched and carry out its activities, and will not be subject to ongoing supervision by the CSSF.  The RAIF will however, be required to comply with AIFMD product rules, including the appointment of a depositary and an independent auditor. The AIFM of a RAIF shall be able to market the RAIF to professional investors in Member States by using the AIFMD passport.

Collective Investment schemes not eligible for the RAIF regime

The following collective investment schemes are not eligible for the RAIF regime:

  • AIFs using the benefit of an exemption or derogation under the AIFMD, such as the so called de minimus or group exemption;
  • Internally managed AIFs. The only time when a RAIF does not require an external AIFM is when it is managed by:
    • a supranational institution (such as ECB, EIB, EIF); (or by another similar international institution acting in the public interest;) or
    • the Central Bank of Luxembourg or another central bank.

Constitution of a RAIF

A RAIF may be established in contractual form (FCP) or corporate form (SICAV/SICAF). The corporate forms are:

  • SA (limited liability company)
  • Sarl (private limited liability company)
  • SCA (corporate partnership limited by shares)
  • SCS/SCSp (common or special limited partnership)
  • SCSA (public limited liability company

Organisation of a RAIF

RAIFs can be organised as an umbrella fund where it will consist of one or more sub-funds/compartments, or can be structured as a single fund. Whether the RAIF is organised as an umbrella fund or a stand alone fund, it is possible for there to be multiple classes of shares/unit.

The RAIF Law also details that a RAIF organised as an umbrella fund will be provide sub-funds/compartment with the “ring-fencing” principle to separate part of the assets and liabilities of the RAIF.  Sub-funds/compartments in the RAIF will also be able to “cross-invest” in another compartment, without being subject to the requirements of the law regarding subscription, the acquisition and/or the holding by a company of its own shares.

Restrictions on a RAIF

A RAIF is not subject to any legal investment and borrowing rules, which enables a RAIF to be very flexible with regards to which assets the RAIF may invest in and its investment strategy. The RAIF will however remain subject to the principle of risk diversification. If however, the RAIF restricts its investment policy (in its constitutive documents) to investments in risk capital only, it will not be obliged to comply with the risk diversification principle.

Target Investors

RAIFs may be marketed to the following types of investors:

  • Professional Investors which are investors deemed to be professional clients as defined under Annex II of MIFID (or may on request, be treated as professional clients)
  • Qualifying Investors, being investors that fulfil the following criteria:
    • Invest a minimum of EUR 125,000; and
    • Declare in writing to the AIFM and the AIF that they are aware of and accept the risks associated with the proposed the following; and


RAIFs shall be submitted to the same favourable tax treatment as the one applicable to SIFs or SICARs as it is exempt from income and net wealth taxes, its distributions are exempt from withholding tax

RAIFs are subject to annual subscription tax (taxe d’abonnement) at a rate of 0.01%. The Law however states some exemptions for RAIFs from the subscription tax. Some examples of RAIFs that would be exempt are institutional money market RAIFs meeting certain criteria, RAIFs set up as a pension pool vehicle for a group and microfinance RAIFs. Any RAIF will have to be registered on a RAIF-list to be kept by the Luxembourg Registrar of Commerce and Company.

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