9th December 2015
Keith McShea provides news and analysis of the latest regime in Luxembourg.
Fund structuring options in Luxembourg are set to increase in 2016 (along with the litany of fund acronyms!), with the introduction of a new unregulated fund regime, the Reserved Alternative Investment Fund (RAIF).
The RAIF will be based upon the popular Specialised Investment Fund (SIF), with the key difference being it not be regulated by the Commission de Surveillance du Secteur Financier (CSSF). As such, it will be possible to establish a RAIF without CSSF approval (and the related application process, applicable to SIFs and other regulated funds).
For the first time in Luxembourg, the RAIF regime will facilitate the use of umbrella or multi-compartment funds in the unregulated space. So, fund promoters and managers will soon be able to establish a multiple strategy fund platform in a single Luxembourg vehicle without CSSF supervision in respect of that vehicle.
There will also be scope to waive the general investment diversification requirements so that funds or sub-funds can be established with a single investment strategy. As with the SIF regime, it will be possible to establish a RAIF in a variety of legal forms (corporate, limited partnership or contractual).
It is clear there will be a requirement for a RAIF to be managed by a fully authorised Alternative Investment Fund Manager (AIFM), which may render the regime less attractive for some. It will not be a hurdle for the larger fund managers established in the EEA. It may, however, be an obstacle for smaller promoters and managers and non-EEA managers.
Of course, the requirement for a fully licensed AIFM does not preclude the establishment of RAIFs by promoters and managers that do not have this licence - third party AIFMs will be able to plug this gap, but there will obviously be a cost to this.
In addition, the other costs of running a fund whose AIFM is subject to the full scope of the AIFMD(1) will apply (e.g. costs of a depositary, an auditor and a valuer).
It is also noteworthy that as a RAIF's AIFM will be fully authorised under the AIFMD, a RAIF will be eligible to be marketed to professional investors throughout the EEA under an AIFMD passport.
The legislative process to implement the RAIF law has started; we therefore understand that the regime should be effective by summer 2016. At this time, Langham Hall will be able to provide a broad range of administration, domiciliation, accounting and depositary services for RAIFs.
For further information on Langham Hall Luxembourg’s services, please contact Keith McShea or Tatyana Boger.
(1) Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers