General Information about RAIF’s

Eligible Investors

Investment into RAIFs is limited to well-informed investors. By limiting the range of investors to well-informed investors, the law ensures that they are able to adequately assess the risks associated with an investment in a RAIF.

According to the provisions set out in the RAIF Law, an investor considered as well-informed is:

  1. An institutional investor;
  2. A professional investor;
  3. Any other type of investor who has confirmed in writing their status of well-informed investor and either invests a minimum of €125,000 or has an appraisal from a bank, an investment firm or a management company confirming certifying his expertise as an ‘informed investor’.

Appoint an AIFM

RAIFs are required to be managed by an authorized Alternative Investment Fund Manager (AIFM). The AIFM may be established either in the Grand Duchy of Luxembourg, in a member state of the EU or in a country located outside the EU provided that the entity complies with the provisions set out in the AIFM Directive respectively the AIFM Law.

Legal Structures

The RAIF may be structured under different forms, notably as:

  1. An open-ended legal entity (SICAV);
  2. A fixed capital company (SICAF);
  3. A contractual form (FCP).

However the RAIF is not limited to a legal setup, and therefore other legal forms may be possible (e.g. SCS or SCSp).

RAIFs can be structured as stand alone or umbrella funds with multiple fund compartments, where each compartment or sub-fund may follow a different investment strategy. Each fund or sub-fund may have an unlimited number of share classes depending on the needs of the investors to whom the fund or sub-fund shall be distributed.

A RAIF set up as a SICAV or SICAF can be set up under the following forms:

  1. Public limited company (SA);
  2. Partnership limited by shares (SCA);
  3. Private limited liability company (SARL);
  4. Cooperative in the form of a public limited company (SCSA).

Capital structure and dividend policy

The RAIF Law provides that the minimum capitalization of a RAIF shall be €1,250,000, a minimum amount that must be reached within 12 months from the date of authorization of the RAIF. In the case of an FCP, the reference point for this minimum amount is the subscribed capital plus any issue premium paid, rather than the net assets.

Issued shares of a RAIF organized as a SICAV must be fully subscribed, but only 5% of the value of each share must be paid up, in cash or in kind, upon subscription. This facilitates investment structures making use of capital calls such as private equity funds.

A RAIF is not required to maintain a legal reserve and the RAIF Law does not provide any specific restriction on the distribution of dividends. Nevertheless, the payment of dividends shall not result in the size of the RAIF falling below the minimum capitalization of €1,250,000.


The registered office of the RAIF must be located in the Grand Duchy of Luxembourg. The board of directors, which does not have to be approved by the CSSF shall appoint the following service providers:

  1. The AIFM must be a regulated entity, duly, supervised by its local Financial Authority and compliant with the prevailing AIFM Directive;
  2. Custodian Bank: Oversight and Safekeeping functions – The Custodian Bank must be a credit institution having its registered office or establishment in the Grand Duchy of Luxembourg. Its role comprises the general oversight function and the safekeeping of assets. The AIFM or Central Administrator may take the role of the depositary under certain conditions laid down by the AIFM Law. In addition to the type of depositary described above, a new type of Luxembourg depositary has been introduced with the AIFM Law, namely the professional depositary of assets other than financial instruments;
  3. An External Auditor, based in Luxembourg must review the annual accounts of a RAIF. The auditor shall provide evidence that it has an appropriate level of professional experience in the investment strategy followed by the RAIF respectively the types of assets held in the portfolio;
  4. The Central Administration, with a PSF license must have its offices in Luxembourg. The meaning of the central administration in Luxembourg implies that accounting and administrative functions such as the calculation of the Net Asset Value must be effected in Luxembourg or initiated from Luxembourg.

Investment flexibility

The RAIF Law offers a broad scope of eligible assets and investment strategies, as there are no prescribed investment restrictions for any type of assets or strategies. An RAIF may but is not required to invest in: equities, bonds, derivatives, structured products, real estate, hedge fund and private equity. There are no detailed investment or leverage restrictions. However, RAIFs are subject to the principles of risk diversification similar to the SIFs.

Under certain conditions, namely if the RAIF restricts its investment policy in its constitutive documents to investments in risk capital, then it will not be required to operate under the principle of risk spreading.


RAIFs managed by an EU-authorized AIFM benefit from a marketing passport, which allows the AIFM to market the shares, units or partnership interests of the RAIF to professional investors within the EU through a regulator-to-regulator notification regime.

RAIFs managed by an AIFM that is not authorized within the EU, do not benefit from this passport. This means that the marketing of these shares, units or partnership interests in the EU is subject to national private placement rules in the countries where the entity will be marketed or distributed.

The marketing of RAIFs outside or within the EU to well-informed investors, which do not qualify as professional investors, requires compliance with the NPR (national private placement rules) of each country where such marketing distribution is done.

Efficient and flexible tax regime

There are many different tax regimes applicable to a RAIF. By default, the RAIF is subject to a similar tax regime as the specialized investment fund (SIF). As such, the RAIF is exempt from Luxembourg wealth and income taxes. Furthermore, no taxes are levied on the income received or the capital gains realized by a RAIF.

In principle RAIFs are subject to an annual subscription tax of 0,01% based on the net asset value calculated at the end of each quarter (lower than the subscription tax applied to most other undertakings collective investments). The RAIF Law exempts however from the subscription tax the assets invested in other Luxembourg based UCIs subject to this tax, certain institutional cash funds, microfinance funds and, pension pooling funds.

For RAIFs structured under the FCP or SCSp regimes, full tax transparency is applicable. For RAIFs that are not set up as FCPs and which are investing in risk capital, a tax regime similar to the one prevailing to SICARs will apply. In this case, the RAIF will be subject to corporate income tax/municipal business tax, but any income from transferable securities and income from temporary investments (<12months) are exempted. There is no withholding tax on distributions, no subscription tax and no tax on speculative capital gains for investors.

No Supervision

The RAIF itself is not subject to the supervision of the CSSF. With the RAIF, the Luxembourg government will introduce a new flexible investment vehicle combining an attractive tax regime with a considerably reduced time-to-market.

Other than the traditional SIF, the RAIF does not need to obtain a formal approval from the CSSF and the CSSF does not need to review and approve the constitutive documents, the choice of directors/managers, the AIFM and other service providers .

As an AIF, the RAIF must comply with the provisions set out in the AIFM Directive and the prevailing AIFM Law. Nevertheless, the latter will not stand under the supervision of the CSSF. Under the RAIF regime, investor protection is offered through the appointment of a duly regulated and authorized AIFM, which will stand under the supervision of its its national supervisory authority (“CSSF” in Luxembourg).

Valuation Function

The valuation function of a RAIF comprises the valuation of assets as well as the calculation of the NAV. The valuation task has to be performed either by the AIFM itself or by an external appraiser under the responsibility of the AIFM.The NAV calculation is in turn either performed by the AIFM itself or an appointed duly recognized central administrator which must have its registered office in Luxembourg. The external appraiser must be subject to the mandatory professional registration recognized by law. The appointed external valuer cannot delegate its function to third parties. The NAV must in turn be calculated at least once a year.

As per the AIFM Law, the valuation function must be independent from the portfolio management.

Valuation of assets

The RAIF Law states that, unless otherwise provided in the management regulations (FCP), Limited Partnership Agreement (SCS or SCSp) or articles of incorporation (SICAV), the assets of a RAIF must be valued at fair value. This value is to be determined in accordance with the rule set forth in the constitutive documents.

Furthermore, RAIFs are not required to calculate and publish their net asset value (NAV) on a regular basis, but the NAV must be computed at least once per year.

Depositary functions

According to the RAIF Law, the depositary of a RAIF may either be a credit institution, an investment firm or a professional depositary of assets other than financial instruments.

Depositaries of RAIFs must comply with the depositary regime as provided for by the AIFM Law. This regime imposes specific duties on the depositary, which are:

  1. The obligation to safe-keep the assets of a RAIF;
  2. The obligation to monitor the cash flows of a RAIF;
  3. The obligation to perform specific oversight duties.

In addition, the AIFM Law has strengthened the liability regime of the depositary. The depositary is now strictly liable in the case of a loss of financial instruments held in custody. And, it must without immoderate delay, return financial instruments of an identical type or of a corresponding amount to the RAIF or the AIFM acting for the RAIF. The possibilities to avoid this consequences are very limited with the strengthened liability regime.

Any other losses caused by the depositary’s negligent or intentional failure to properly fulfill its obligation under the AIFM Law is under the depositary’s liability.

Delegation of AIFM functions

The AIFM may under certain conditions and in compliance with prevailing laws and regulations delegate one of the two core functions(i.e. portfolio management and risk management) to a duly regulated external party. However, the AIFM must be able to justify the entire delegation structure to the CSSF or the competent authority of their country. The AIFM shall also be able to demonstrate that the delegate is qualified and capable of undertaking the delegated functions.

The rules regarding the delegation of portfolio and risk management functions are similar to the rules applicable to existing business models of UCITS outsourcing the management function.

AIFMs shall at all time remain responsible for the proper performance of their functions and compliance with the rules set out in the AIFM Law. Their liability towards the RAIF and its investors may in no case be affected by the fact that the AIFM has delegated functions to a third party. The AIFM will therefore have to closely monitor at any time further instructions to the delegatee and to withdraw the delegation with immediate effect when this is in the interest of the RAIFs investors