Reserved Alternative Investment Fund (RAIF)

The Reserved Alternative Investment Fund — RAIF — has become the most widely used alternative investment vehicle in Luxembourg. Introduced by the law of 23 July 2016, it combines speed to market, legal flexibility and a streamlined tax regime, without requiring prior approval of the fund itself by the CSSF. This guide covers the legal framework, investor eligibility criteria, available legal forms, tax regime, setup steps and required service providers for structuring a Luxembourg RAIF.

Legal framework of the RAIF

The RAIF was introduced by the Luxembourg law of 23 July 2016, which opened a hybrid regime drawing on the SIF (2007 law) and SICAR (2004 law) frameworks. Its defining feature is that the fund itself is not subject to prior approval by the Commission de Surveillance du Secteur Financier (CSSF). Supervision is exercised at the level of the manager — an authorised AIFM — rather than the product. This architecture removes the dual regulatory layer that weighs on SIFs and SICARs, and explains the speed-to-market advantage of the vehicle.

The RAIF therefore qualifies as an alternative investment fund (AIF) within the meaning of AIFMD: it must appoint an authorised alternative investment fund manager (AIFM) established in Luxembourg or in another EU Member State and benefiting from the management passport. This external AIFM bears responsibility for risk management, portfolio management and regulatory reporting.

Investor eligibility criteria

The RAIF is restricted to well-informed investors within the meaning of the law. Three categories are eligible:

• Institutional investors — banks, insurance companies, pension funds, UCIs.
• Professional investors within the meaning of MiFID II.
• Other investors who confirm in writing that they adhere to the well-informed investor status and who either invest a minimum of EUR 125,000 in the fund, or whose experience and capacity to understand the risks have been assessed by a credit institution, an investment firm or a management company.

Available legal forms

The RAIF offers a broad palette of legal forms, allowing the vehicle to be aligned with the investment strategy and the target investor base.

• Contractual form — common fund (FCP), without legal personality, managed by a management company.
• Corporate form with variable capital — SICAV.
• Corporate form with fixed capital — SICAF.
• Partnerships — common limited partnership (SCS) and, very frequently used for private equity, the special limited partnership (SCSp), tax transparent.
• Capital companies — public limited company (SA), private limited company (S.à r.l.), partnership limited by shares (SCA).

The RAIF may be constituted as a single fund or structured as a multi-compartment (umbrella) fund, allowing several strategies to be housed under the same legal envelope with ring-fencing of assets and liabilities between compartments.

Minimum capital and paid-up amount

The minimum net asset value of a RAIF is set at EUR 1,250,000. This threshold must be reached within twelve months following constitution. At subscription, at least 5% of subscribed capital must be paid up, the balance being callable in accordance with the terms set out in the fund documentation — a mechanism particularly suited to private equity or private credit strategies, where capital calls drive the pace of investment.

Tax regime of the RAIF

The default tax regime of the RAIF mirrors that of the SIF:

• The fund is exempt from corporate income tax (IRC), municipal business tax (ICC) and net worth tax.
• It is subject to an annual subscription tax of 0.01% on net asset value, levied quarterly.
• Certain compartments or share classes are exempt from the subscription tax (notably those investing exclusively in other funds already subject to the subscription tax, or compartments reserved for pension funds).
• Distributions paid to investors are, in principle, not subject to withholding tax in Luxembourg.
• Management services provided to the RAIF benefit from a VAT exemption in Luxembourg.
• No registration duty is due on the issue of units or shares.

Where the RAIF invests primarily in risk capital, it may elect for the SICAR tax regime: it is then subject to ordinary corporate income tax but benefits from an exemption on income and gains derived from risk-capital securities, and is not subject to the subscription tax. The accounting and tax treatment of the fund must be documented with rigour — see our hub Comptabilité au Luxembourg for the obligations applicable to investment vehicles and holdings.

Why choose a RAIF — key advantages

Speed to market

The absence of prior CSSF approval at product level brings the launch timeline down to a few weeks once the AIFM, depositary and central administration have been selected and the documentation finalised. This is the decisive competitive advantage over the SIF and SICAR, which remain subject to prior CSSF approval.

AIFMD marketing passport

Managed by an authorised AIFM, the RAIF benefits from the European marketing passport to professional investors throughout the EEA. Marketing outside the EU falls under national private placement regimes.

Flexibility and conversion

The RAIF may be converted into a SIF or SICAR if additional regulatory protection becomes necessary; conversely, an existing SIF or SICAR may switch to the RAIF regime.

Steps to set up a RAIF in Luxembourg

1. Definition of the investment strategy and choice of legal form (SCSp for private equity, SICAV for private credit or real estate, FCP for multi-investor strategies).
2. Selection of the AIFM — internal (dedicated subsidiary) or external (third-party platform).
3. Appointment of the depositary, central administration, transfer agent and approved statutory auditor.
4. Drafting the fund documentation: articles or management regulations, offering document (PPM/OM), services agreements.
5. Incorporation before a Luxembourg notary (for corporate forms) or signing of the management regulations (FCP).
6. Registration with the Luxembourg Trade and Companies Register and inscription on the official list of RAIFs maintained by the RCS within 20 business days following constitution.
7. AIFMD notification by the AIFM to the authorities of the Member States of marketing.

Required service providers

• AIFM authorised under AIFMD, responsible for risk management and portfolio management.
• Luxembourg depositary — bank, investment firm or professional depositary for assets other than financial instruments depending on the strategy.
• Central administration — NAV calculation, record keeping, fund accounting.
• Transfer agent and registrar (TA/RA).
• Approved statutory auditor (réviseur d’entreprises agréé) for the audit of the annual accounts.
• Luxembourg legal and tax counsel for documentation and ongoing compliance.
• Depending on the strategy: independent valuer, prime broker, real-asset depositary, paying agent in the marketing jurisdictions.

Damalion supports its clients in the coordinated selection of these service providers and in the overall fund structuring.

RAIF, SIF, SICAR and FCP: comparison table

For a more detailed functional analysis, see our dedicated pages on the Specialized Investment Fund (SIF), the SOPARFI, the SPF and Luxembourg securitisation vehicles.

Frequently asked questions

Written by the Damalion team, an independent consulting corporation based in Luxembourg, specialised in the structuring of alternative investment funds and holding vehicles. Article maintained current with the evolution of the Luxembourg regulatory framework and market practice.