Luxembourg’s Reserved Alternative Investment Fund (RAIF) has rapidly become the vehicle of choice for asset managers and institutional investors seeking to raise and deploy capital across borders. By combining regulatory flexibility, tax neutrality, and a fast-track setup, the RAIF is ideally suited to international strategies in Real Estate, Private Equity, Infrastructure, and Private Debt.
We explore how the RAIF structure can be leveraged across these key sectors to efficiently attract global investors. Please remember, your RAIF will need a depositary bank. Damalion may introduce you to a flexible custodian bank to help you start your fund in a reasonable time frame.
What is a RAIF (Reserved Alternative Investment Fund) ?
The Luxembourg RAIF is an unregulated alternative investment fund that must be managed by an authorised Alternative Investment Fund Manager (AIFM) governed by the EU Alternative Investment Fund Managers Directive (AIFMD). While the fund itself is not supervised by Luxembourg’s financial regulator (CSSF), it benefits from full access to the AIFMD passport—allowing fund managers to market to professional investors across the EU.
Key Features:
- No direct supervision by the CSSF
- Fast-track setup: launch possible before regulator approval
- Flexibility in investment policy and strategy
- Wide range of legal forms: SCSp, S.A., S.à r.l., S.C.A., etc.
- Tax neutrality for SCSp and SCS forms
- EU passport for distribution across Europe via AIFM
Real Estate: Attracting Cross-Border Capital to Property Markets
Luxembourg RAIFs are frequently used by sponsors and institutional players targeting residential, commercial, and logistics real estate in the EU and globally. The RAIF structure supports a wide range of strategies:
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Core and Core+ Income Funds targeting stabilized assets
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Value-add and Opportunistic Strategies involving asset repositioning or redevelopment
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Build-to-Rent and Logistics Portfolios, especially in urban growth corridors
Advantages:
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Use of tax-transparent SCSp for pass-through treatment
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No legal limitation on leverage
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Multi-compartment option allows fund managers to isolate risks and strategies (e.g., separate sub-funds for Germany, France, and CEE)
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Structures are eligible for foreign tax treaty benefits through platform-level SPVs
Example: A Frankfurt-based asset manager established a €400M RAIF to acquire logistics assets across Benelux, benefiting from institutional co-investment and the RAIF’s flexible debt-financing rules.
Private Equity: Streamlining Multi-Jurisdictional Buyouts
Luxembourg RAIFs are well-suited to leveraged buyouts (LBOs), growth capital, and venture investments, with managers using them to deploy capital in European SMEs, tech companies, and family-owned businesses.
Key features for PE sponsors:
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Ability to mirror classic GP/LP structures (especially with the SCSp legal form)
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No minimum diversification rule (unlike UCITS or Part II funds)
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Flexibility to define carried interest and waterfall provisions
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RAIF can hold controlling interests, unlike some regulated funds
Legal structuring options: Most PE-focused RAIFs are created as special limited partnerships (SCSp) with a General Partner entity and an AIFM as manager.
Example: A Paris-based fund manager uses a Luxembourg RAIF to manage a €250M vehicle focused on acquiring family businesses in Southern Europe. The structure allows full control while onboarding institutional LPs across France, Germany, and Switzerland.
Infrastructure: Long-Term Investment, Long-Term Structure
RAIFs are increasingly used for infrastructure investments in renewable energy, digital infrastructure (data centers, fiber), and transport assets.
The RAIF offers a long-term and tax-efficient structure that aligns with:
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Institutional investor demand for stable, inflation-linked returns
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ESG investment mandates
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Cross-border SPV ownership structures for assets in Italy, Spain, Poland, etc.
Capital structuring flexibility: A RAIF can issue both equity and debt instruments and can integrate financing instruments at the fund or SPV level.
Example: A Nordic asset manager raised a €1B Luxembourg RAIF to co-invest in offshore wind parks with a sovereign wealth fund. The SCSp format facilitated a transparent allocation of returns and flexible reinvestment rules.
Private Debt: A Platform for Lending and Credit Investment
RAIFs are also ideal vehicles for private credit, including:
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Real estate mezzanine finance
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Asset-backed lending
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Distressed debt and NPL acquisition
Why use a RAIF for debt strategies?
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Can invest freely in illiquid or non-rated instruments
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No diversification rules
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Can accommodate multiple tranches of notes (senior, mezzanine, junior)
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Can be structured to allow for semi-open or evergreen fund models
Legal and operational structure: Most debt RAIFs are structured as S.C.Sp. with a regulated AIFM and third-party loan servicing agreements in place.
Example: A UK-based lender launched a €300M Luxembourg RAIF for real estate-backed loans in Tier-2 German cities, using the vehicle to onboard pension funds seeking 5–7% net yields.
Advantages of the RAIF by Sector
| RAIF Feature | Real Estate | Private Equity | Infrastructure | Debt |
|---|---|---|---|---|
| Fast setup time | Quick market entry for acquisitions | Fast fundraising for time-sensitive deals | Accelerates PPPs and private placements | Ideal for niche strategies and roll-outs |
| Flexible legal form (SCSp) | Tax-transparent co-investment structure | Structured GP/LP and carried interest | Investor control over long-term assets | Note issuance and hybrid capital options |
| Multi-compartment option | Segregate by asset class or region | Focus by industry or growth stage | Different project types or ESG strategies | Separate credit risk strategies |
| No diversification rules | Single building or asset portfolios | Concentrated LBO or VC bets | Few large infrastructure projects | Focused borrower groups |
| Tax neutrality (SCSp) | Efficient for cross-border cash flows | Carry and capital gains distribution | Yield flows for pension/SWF investors | Interest passed to institutional LPs |
| Flexible governance | Manager discretion and SPV integration | Custom waterfall and voting rights | ESG governance and board oversight | Loan servicing and risk control terms |
| EU passport via AIFMD | Access to cross-border real estate investors | Market to LPs across the EU | Aligns with sustainable finance initiatives | Distribute notes to EU credit investors |
Why International Investors Prefer the Luxembourg RAIF
For international investors—pension funds, insurance companies, sovereign wealth funds, and family offices—the RAIF offers:
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Regulatory comfort via AIFM oversight, without the delays of full fund approval
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Tax neutrality, especially when structured as SCSp
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Robust governance and investor protection mechanisms (depositary, audit, risk management)
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Speed to market (often within 4–6 weeks)
Combined with Luxembourg’s deep service provider ecosystem, strong legal framework, and multilingual talent pool, the RAIF positions fund sponsors to scale international strategies rapidly.
Launch your Luxembourg RAIF
Whether you’re a real estate sponsor, a private equity manager, an infrastructure investor, or a credit fund originator, the Luxembourg RAIF is an adaptable, scalable, and efficient platform for launching cross-border investment vehicles.
Its unique blend of flexibility, speed, tax neutrality, and investor access positions it as one of Europe’s top fund solutions.
At Damalion, we assist fund sponsors with:
- RAIF legal setup and structuring
- Selection of AIFMs and service providers
- Tax and compliance planning
- Investor onboarding across jurisdictions
Contact your Damalion expert to learn how we can structure your Luxembourg RAIF for maximum global reach and investor appeal.
10 things to do in Luxembourg on your 24 hours business trip!
🎨 Five Cultural Attractions
1. National Museum of History and Art (MNHA)
Luxembourg’s flagship state museum featuring archaeology, history, and fine art collections.
2. Musée Dräi Eechelen – Fort Thüngen
Housed in an 18th-century fort in Kirchberg, it offers immersive exhibitions on Luxembourg’s military and urban past.
3. Villa Vauban – Luxembourg City Art Museum
Historic villa and gallery presenting Luxembourgish and European artworks in serene garden surroundings.
4. Lëtzebuerg City Museum
Interactive five-storey museum exploring Luxembourg City’s evolution over a millennium.
5. Old Quarters & Fortifications (UNESCO site)
Guiding you through medieval streets and historic ramparts as part of the UNESCO World Heritage area.
🍽️ Five Recommended Restaurants
6. L’Hêtre Beim Musée
A stylish brasserie beside the City Museum offering Luxembourg regional cuisine in a courtyard setting.
7. Le Plëss
Located in Hotel Le Place d’Armes, this refined brasserie serves flame‑roasted meats and seasonal dishes in an elegant ambiance.
8. Um Dierfgen
Traditional Luxembourgish “Brasserie Restaurant” serving local classics like judd mat Gaardebounen in a convivial, rustic setting.
9. Mosconi
Michelin-starred Italian fine dining in the scenic Grund district, led by chef Ilario Mosconi, featuring handmade pasta and premium ingredients.
10. Bar à vin (Baravin)
Urban wine bar and bistronomy spot offering curated wines, charcuterie, and light dishes ideal for relaxed business unwinding.
