What is a Luxembourg RAIF?
The Luxembourg Reserved Alternative Investment Fund (RAIF) is a flexible and efficient investment vehicle introduced by the Law of 23 July 2016. The RAIF regime was established to meet the needs of institutional, professional, and well-informed investors seeking a streamlined, regulated alternative fund structure without direct supervision by the Luxembourg financial regulator (CSSF). Instead, regulatory oversight is exercised indirectly through the requirement that a RAIF must be managed by an authorised Alternative Investment Fund Manager (AIFM) regulated under the AIFMD.
The RAIF may be established as an umbrella fund with multiple compartments, each pursuing a distinct investment strategy. It is suitable for a broad range of alternative strategies, including real estate, private equity, private debt, infrastructure, and fund-of-funds. As a contractual fund (FCP) or as a company, a RAIF can take various legal forms such as SCA, SCS, SCSp, SA, Sàrl, or SCoSA, offering maximum structuring flexibility for sponsors and investors alike.
RAIFs benefit from the marketing passport for alternative funds under AIFMD, allowing the fund to be distributed across the European Economic Area (EEA) to professional investors. For fund promoters seeking a rapid time-to-market and institutional-grade governance, the Luxembourg RAIF is a commonly used option. For further details on the RAIF regime and its structuring benefits, refer to our Luxembourg RAIF guide.
RAIF vs SIF: key regulatory and structural differences
Regulatory supervision
The most significant distinction between the RAIF and the Specialised Investment Fund (SIF) is the regulatory approach. SIFs, governed by the Law of 13 February 2007, require prior CSSF approval and ongoing direct supervision, resulting in a longer launch timeline. RAIFs, by contrast, do not require CSSF approval before commencing activities; instead, the requirement to appoint an authorised AIFM ensures indirect regulatory oversight and compliance with the AIFMD framework.
Time-to-market and flexibility
RAIF formation is typically faster than a SIF, often launching within weeks, as there is no need to await CSSF approval. This makes the RAIF suitable for managers needing prompt deployment of capital in competitive alternative asset markets. Structurally, both vehicles offer umbrella structures and similar eligible investor criteria (well-informed investors), but the RAIF is exclusively reserved for AIFMD-compliant management and marketing, whereas the SIF can be managed by non-AIFMD managers if below AIFMD thresholds.
Suitability for alternative strategies
Both vehicles support real estate, private equity, debt, and infrastructure strategies. However, the RAIF, by design, uses the AIFMD marketing passport, while the SIF may have a wider or narrower marketing scope depending on its management setup. For cross-border sponsors targeting pan-European fundraising, the RAIF’s passportability is a critical advantage.
RAIF tax regime and subscription tax
Favourable taxation for institutional investors
The Luxembourg RAIF enjoys a favourable tax regime akin to that of SIFs and SICARs. RAIFs are not subject to Luxembourg corporate income tax, municipal business tax, or net wealth tax (except for certain cases such as investment in real estate located in Luxembourg). Instead, the principal tax applicable is the annual subscription tax (taxe d’abonnement), levied at 0.01% per annum on the net asset value, calculated and payable quarterly.
Additional tax considerations
RAIFs investing exclusively in risk capital may elect to be taxed as a SICAR, falling under the regime of the Law of 15 June 2004. In such circumstances, the RAIF would be fully taxable, but exempt on qualifying investment income and capital gains. RAIFs investing in real estate located outside Luxembourg typically benefit from double tax treaty access depending on their legal form, with tax transparent forms such as SCSp and SCS being particularly efficient for tax structuring.
VAT and withholding taxes
Management services provided to a RAIF are exempt from Luxembourg VAT. No withholding tax applies on distributions made by the RAIF to its investors. This efficient tax treatment enhances the net returns for institutional, family office, and cross-border investors.
Compartment structuring under the RAIF framework
Umbrella structure and ring-fencing
The RAIF can be established as an umbrella fund, with multiple compartments (sub-funds) each pursuing separate investment strategies, asset classes, or investor bases. Each compartment is treated as a distinct pool of assets and liabilities, and the rights of investors and creditors are limited to the assets of the relevant compartment. This statutory ring-fencing is set out in Article 50 of the Law of 23 July 2016.
Operational flexibility
Compartments within a RAIF can have different legal forms, fee structures, redemption terms, and investment policies. For example, one compartment may invest in private equity, while another focuses on real estate or private debt. Compartments may be launched, closed, or restructured without impacting the legal status or operations of other compartments, offering sponsors and investors a high level of flexibility in portfolio construction and capital raising.
Segregation for risk management
Segregation of assets and liabilities among compartments is essential for institutional investors, providing comfort that liabilities in one compartment do not contaminate others. This structuring is often used for multi-strategy or multi-investor platforms, club deals, and feeder-master arrangements.
RAIF formation: requirements, timeline, and AIFM appointment
Formation process and legal requirements
RAIF formation begins with the drafting of the constitutional documents (limited partnership agreement, articles of association, or fund rules), depending on the chosen legal form. The minimum capital requirement is EUR 1,250,000, to be reached within 12 months of launch. The fund must appoint an authorised external AIFM, a depositary (typically a credit institution or investment firm established in Luxembourg), central administrator, and auditor. No prior CSSF approval is needed; the RAIF is registered in a dedicated RAIF list maintained by the Luxembourg Trade and Companies Register (RCS).
Timeline and launch speed
Thanks to the absence of direct CSSF authorisation, a RAIF can typically be launched within 2 to 6 weeks, subject to the readiness of the AIFM, service providers, and investors. This speed is distinctly useful for time-sensitive investment strategies or opportunistic capital deployment.
RAIF AIFM requirement and ongoing obligations
The RAIF must be managed by an authorised AIFM, whether established in Luxembourg or another EEA country. The AIFM is responsible for compliance with the AIFMD, including risk management, portfolio management, valuation, reporting, and marketing. The AIFM ensures that the RAIF complies with the regulatory obligations established under the AIFMD, as implemented in Luxembourg by the Law of 12 July 2013. The absence of direct CSSF supervision is balanced by strong AIFM oversight, institutional-grade governance, and investor protection mechanisms.
Ongoing obligations include annual audits, periodic NAV calculations, investor disclosures, and registration of the RAIF with the RCS. The fund must also comply with anti-money laundering and counter-terrorism financing requirements under the Law of 12 November 2004.
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