Up until now all unregulated investment sctructures in Luxembourg needed to have a company structure rather than a fund one, but the AIFMD has introduced the concept of “unregulated” AIFs which will benefit form a European marketing Passport.
The bill for this concept, the Reserved Alternative Investment Fund (RAIF) will run through the usual legislative process and is therefore still subject to change. A final text of the law might be adopted in the second quarter of 2016.
Denise Voss, Chairman of ALFI, explains: “The future Luxembourg RAIF Law will provide an additional – complementary – alternative investment fund regime which is similar to both the Specialised Investment Fund and SICAR regimes.”
Currently Luxembourg rules not only require the Luxembourg Alternative Investment Fund Manager (AIFM) to be authorised and regulated by the CSSF but also require the Alternative Investment Fund (AIF), usually a Part II UCI, a SIF or a SICAR, to be authorised and supervised by the CSSF. The CSSF approves and supervises the Luxembourg AIFM and the Luxembourg AIF separately.
The new RAIF is an AIF that has very similar features to the Luxembourg SIFs and SICARs with the key difference that the RAIF does not need to be approved and is not supervised by the CSSF.
Jacques Elvinger, partner at Elvinger, Hoss & Prussen and Chairman of ALFI’s Regulation Advisory Board, highlights the benefits of the new regime: “Managers will benefit from a reduced time-to-market because the RAIF itself does not have to be approved by the Luxembourg regulator. Going forward, managers will be able to choose whether to set up their Luxembourg AIF as Part II UCI, SIF or SICAR if they or their investors prefer for the AIF to be supervised by the CSSF, or to set up their AIF as a RAIF, which does not need to be approved and supervised by the CSSF, with consequent time-to-market benefits.”
Claude Niedner, partner at the law firm Arendt & Medernach and Chairman of ALFI’s alternative investments committee, mentions that “the RAIF legislation will enable Luxembourg and foreign AIFMs to benefit from a flexible and innovative investment fund vehicle.”
In order to ensure sufficient protection and regulation via its manager, a RAIF must be managed by an authorised external AIFM. The latter can be domiciled in Luxembourg or in any other Member State of the EU. If it is authorised and fully in line with the requirements of the AIFMD, the AIFM can make use of the marketing passport to market shares or units of RAIFs on a cross-border basis. As is the case for Luxembourg SIFs and SICARs, shares or units of RAIFs can only be sold to well-informed investors.
“The new structure will complement our attractive range of investment fund products in Luxembourg and we believe this demonstrates the understanding the Luxembourg lawmaker has of the needs of the fund industry to best serve the interests of investors.“ concludes Denise Voss.
The draft law can be consulted on this link.