Reserved Alternative Investment Fund?
Dale C. Changoo
Managing Principal at Changoo & Associates(30,000+ LinkedIn Connections)
The RAIF is a Luxembourg product launched in 2016 and is subject to ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (AIFMD).
It is a collective investment structure for qualified investors. It offers investment opportunities in alternative assets such as private equity or real estate. It can be created as a multi-compartment investment structure.
AIFMD is a directive that regulates the managers of alternative investment funds rather than the product itself, i.e., the AIF or alternative investment fund. In other words, AIFMD grants managers a licence to create and manage alternative funds in any country in the European Union.
The idea was to offer a flexible alternative investment structure that could be set up quickly and, above all, positioned for competitive access to the European market for managers of alternative assets and AIFs in third countries, offering greater flexibility in authorization and supervision.
How does the RAIF work?
Firstly, it is a regulated product. That is, RAIFs are subject to the Luxembourg Law of 23 July 2016, even though RAIFs are not under the direct supervision of the CSSF, the competent authority in Luxembourg. So, RAIFs can be established without permission from the local authority. Secondly, for an RAIF to be qualified as an AIF, under the AIFM Directive, at the time of launch, it must appoint a European manager with this AIFM status, granted by the country's authority where the asset manager has its official headquarters.
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RAIFs are subject to the principle of diversification of investment risks, with the possibility of creating multiple compartments.
What is the situation with the RAIF today?
It is a huge success that benefits all "AIFM" managers looking for a competitive alternative product and offers the same advantages as any other AIF.
Shortly after the Law of 23 July 2016 came into force, the number of RAIFs rose to 200 structures. Today, according to the Luxembourg RCS (Trade and Companies Register), there are 2,301 RAIFs. RAIFs are catching up with SIF structures (Special Investment Funds) as the ideal legal forms, especially for real estate funds.