The New Luxembourg Reserved Alternative Investment Fund (“RAIF”)

The Reserved Alternative Investment Fund (the “RAIF”) was approved by the Luxembourg Parliament on Thursday 14th July 2016.  The briefing note, which can be accessed via this link, provides an overview of the RAIF.  In particular:-

• the RAIF complements and expands upon the existing range of Luxembourg investment fund products that are known to and respected by investors worldwide and is likely to consolidate Luxembourg's market position and to help it win market share from offshore centres which effectively offer similar unregulated products but currently without the benefits of the AIFMD passport;
• the RAIF is also, however, a potential competitor to unregulated fund products available in other EU countries such as the UK, Gibraltar and, shortly, Malta. Ireland is looking like the odd man out as we understand there are no current proposals for an unregulated Irish fund;
• to the extent that some investors may prefer a regulated structure, a RAIF can be converted into a regulated SIF or other regulated vehicle quite easily. One can envisage managers establishing a RAIF to raise seed or other ‘early bird’ capital and then converting to a regulated SIF or other vehicle when tapping a wider investor base; and
• the RAIF’s key features of speed to market, no CSSF regulation and structural flexibility will appeal to managers seeking to raise funds and get to market quickly. The availability of the AIFMD passport will give it an advantage over non-EU funds which currently cannot access the AIFMD passport.