Download Luxembourg Reserved Alternative Investment Fund (RAIF)

Luxembourg Reserved Alternative Investment Fund (RAIF) The best of two worlds?
What is a RAIF?
a Luxembourg alternative investment fund (‘AIF’)
managed and supervised by an external authorised Alternative
Investment Fund Manager (‘AIFM’)
subject to AIFMD requirements
but not subject to CSSF (product) supervision
Luxembourg Reserved Alternative Investment Fund (RAIF) – The best of two worlds? │ July 2016
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Why should I use a RAIF?
A “SIF” without CSSF supervision
Quick time to market
An additional vehicle for Luxembourg investment platforms
High flexibility
Benefit from investment funds features other unregulated don’t have
Beneficial tax regime and tax features
Luxembourg Reserved Alternative Investment Fund (RAIF) – The best of two worlds? │ July 2016
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How does the RAIF fit into the Luxembourg toolbox?
CSSF product
supervision
traditional assets +
certain alternative
asset classes
UCITS III eligible
assets
venture capital/
private equity
all asset
classes
UCITS
Part I
UCI
Part II
SIF
most asset
classes (with
restrictions)
all asset
classes
SICAR
sec*
Structuring
Flexibility
sec*
LP
*
RAIF
securitisation vehicle
Luxembourg Reserved Alternative Investment Fund (RAIF) – The best of two worlds? │ July 2016
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Is it the right fit for my product?
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Key advantages of RAIFs.
Time to market
Risk diversification requirements more flexible
Umbrella vehicles possible
Contractual type vehicles allowed (FCP)
Attractive tax regime
Variable capital possible, no restrictions on distributions,
no legal reserve
Designation as « fund » based on clear legal definition
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Structuring thoughts.
Indirect supervision by AIFM, directors, depositary,
auditors
Investor requirements
Authorised (not registered) AIFM required
CSSF approved depositary and auditors
Declaration of incorporation before notary, registration on
RCS list, notification to CSSF
Annual report according to scheme in annex to law
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Structuring ideas.
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RAIF master-feeder set-up.
> Feeder for institutional
investors: less investor
protection required
Institutional investors
Feeder RAIF
• Light regulatory
regime
• Quick to market
• Quick adaptations
to regulatory
changes at
investor level
> Master for private investors: full
regulatory supervision and
investor comfort
> Economies of scale in investing
> Easier day-to-day investor
handling since homogeneous
investor groups
> Separate equal
> Treatment assessment at
master and feeder level
> Separate general meetings
Private
investors
Master SICAV-SIF
• CSSF supervision
• higher investor
protection
> No need for private investors’
consent in case of adaptations at
feeder level (example: Solvency
II)
> No subscription tax at feeder
level
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Parallel funds.
> Access for US managers to
European market
> Marketing passport
Investment
Manager
US
investors
Delegation
e.g.
Delaware
AIFM
RAIF
> Upon AIFMD 3rd country
extension: same AIFM for US
and EU fund conceivable
EU
investors
Joint investment by
the Investment
Manager
Luxembourg Reserved Alternative Investment Fund (RAIF) – The best of two worlds? │ July 2016
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Phased approach.
Sponsor investor /
restricted circle
RAIF
Building investment
portfolio
External investors
> Accelerate time to market
> Seize time critical
investment opportunities
Time lapse
Upgrade to
SIF
Performing
investment portfolio
> Investment of seed money
to build investment portfolio
before allowing investors
(avoiding J-curve)
> Setting-up fund for
restricted circle of investors
(e.g. club deal or sponsor
investor), broadening
marketing at later stage
Luxembourg Reserved Alternative Investment Fund (RAIF) – The best of two worlds? │ July 2016
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RAIF – Master Luxco Investment Platform
Pooled
Investors 1
Pooled
Investors 2
Pooled
Investors 3
> Creation / enhancing
Luxembourg substance of
Master Luxco
> Several tax advantages as
compared to a traditional
Master Luxco Soparfi
Master
Luxco
RAIF
AIFM EU
Investment 1
> Structural segregation of
Investors and Investments
Investment 2
Investment 3
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Key features of RAIFs.
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Key features.
RAIF
SIF-AIF
SICAR-AIF
SOPARFI-AIF
Which legal forms may be adopted?
> contractual form:
common fund (fonds commun de placement – FCP)
> contractual form: NA
> contractual form: NA
> partnerships:
common limited partnership (société en commandite simple – SCS
or CLP); special limited partnership (société en commandite
spéciale – SCSp or SLP); partnership limited by shares (société en
commandite par actions – SCA)
> partnerships: common limited
partnership (société en
commandite simple – SCS or
CLP); special limited
partnership (société en
commandite spéciale – SCSp
or SLP), partnership limited by
shares (société en
commandite par actions –
SCA)
> partnerships: NA
> corporate entities:
public limited company (société anonyme – SA), private limited
company (société à responsabilité limitée - S.à r.l.), cooperative
organised as a public limited company (société coopérative
organisée comme une SA SCOSA)
> corporate entities: public
limited company (société
anonyme – SA), private limited
company (société à
responsabilité limitée - S.à
r.l.), cooperative organised as
a public limited company
(société coopérative organisée
comme une SA SCOSA)
> corporate entities: public limited
company (société anonyme –
SA), private limited company
(société à responsabilité limitée S.à r.l.), cooperative organised as
a public limited company (société
coopérative organisée comme
une SA SCOSA)
Luxembourg Reserved Alternative Investment Fund (RAIF) – The best of two worlds? │ July 2016
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Key features.
RAIF
SIF-AIF
SICAR-AIF
SOPARFI-AIF
Umbrella form/use of compartments available?
YES
NO
What management structure may be adopted?
Management bodies:
Board of directors, manager(s) or general partner – dependent on corporate form
No nationality/residency requirement for directors (subject to tax substance requirements)
Promoter/Investment
advisor:
NA
Promoter/Investment advisor:
Promoter/Investment advisor:
No formal approval by the CSSF of the initiator/promoter but
often informal inquiry about initiator
N/A
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Key features.
RAIF
SIF-AIF
SICAR-AIF
SOPARFI-AIF
What types of securities may be issued?
Depending on the legal form which has been chosen (shares, units, interests)
Shares/bonds
Redemption:
Redemptions only if and as provided in the management regulations/articles of incorporation (at investor and/or company request)
Capital calls / Distributions:
Capital calls from and distributions to investors are subject solely to the rules provided in the constitutive documents
No limitation on issue price
Luxembourg Reserved Alternative Investment Fund (RAIF) – The best of two worlds? │ July 2016
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Key features.
RAIF
SIF-AIF
SICAR-AIF
SOPARFI-AIF
What investment policy may be adopted?
Permissible asset classes:
No restriction on asset class unless, in case of RAIF, SICAR
equivalent tax regime sought
Permissible asset classes:
Investment in risk capital, by
direct or indirect investment in
undertakings to be launched,
developed or listed
Permissible asset classes:
No restriction on asset class
Broad concept of ‘risk capital’
Risk spreading:
Risk spreading:
Risk spreading:
Risk spreading:
Risk diversification required
Risk diversification required
No risk diversification required
No risk diversification required
No minimum spread but
responsibility of management
body
In principle, no more than 30%
of the assets or commitments to
subscribe securities of the same
type issued by the same issuer
(Cf. CSSF Circular 07/309)
If no risk spreading required,
the RAIF restricts its
investment policy in its
constitutive documents to
investments in risk capital
then (like SICAR)
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Key features.
RAIF
SIF-AIF
SICAR-AIF
SOPARFI-AIF
Who qualifies as an eligible investor?
well-informed investors only:
No restriction in principle
> institutional investors
> professional investors
> any other investors
(i) which elect to be treated as well-informed investors and
(ii) invest at least €125,000 or
(iii) have a recommendation from a credit institution or
any other professional of the financial sector or a management company
Such conditions are not applicable to the management team
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Key features.
RAIF
SIF-AIF
SICAR-AIF
SOPARFI-AIF
What are the capital requirements?
Corporate minimum requirements:
Depending on the legal form which has been chosen
Fixed/variable capital:
Fixed capital
May opt for variable share capital
Form of contribution:
Contribution in kind and/or in cash permissible
Capital commitments may be contractually agreed
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Governance requirements.
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Governance requirements.
RAIF
SIF-AIF
SICAR-AIF
SOPARFI-AIF
By which entities can RAIF/SIF/SICAR be managed?
Management company required?
NA
for FCP only
NA
AIFM requirement:
Yes
Yes
external authorised AIFM
required (except for supra
national institutions*)
internal (where the legal form of the fund permits an internal management) or
external authorised/registered AIFM (depending on the AuM it manages)
Location of the AIFM:
> In Luxembourg
> In the EU
> Outside the EU**
* e.g. ECB, EIF, IMF
** subject to the application of article 66 of the AIFMD
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Governance requirements.
RAIF
SIF-AIF
SICAR-AIF
SOPARFI-AIF
What service providers are required?
Depositary:
Luxembourg credit institution or Luxembourg branch of a credit institution having its registered office in the EU
Luxembourg presence:
Registered office and central administration in Luxembourg
Auditor:
Independent approved Luxembourg auditor
What are the transparency requirements?
Offering document:
Yes
Offering document:
Yes
Specific warning to investors
regarding the absence of
CSSF supervision
Offering document:
NA
Reports?
Annual reports to investors (subject to AIFMD requirements)
No report to CSSF
Monthly reporting to CSSF
Semi-annual reporting to CSSF*
No report to CSSF
* Monthly as from 30 June 2016, Cf. Circular 15/627
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Supervision.
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Supervision.
RAIF
SIF-AIF
SICAR-AIF
SOPARFI-AIF
Is there any supervision ?
No CSSF supervision
CSSF supervision
No CSSF supervision
AIFM supervision
AIFM supervision
AIFM supervision
Depositary supervision
Depositary supervision
Depositary supervision
Auditor supervision
Auditor supervision
Auditor supervision
Official List:
Official List:
Official List:
Launch without regulatory approval process
CSSF instruction and prior approval
No registration on an official list held by the CSSF
Registration on an official list held by the CSSF
Launch without regulatory
approval process
RAIF to be registered within 10 days as from its
creation on a specific list held by the Register of
Commerce*
No registration on an official
list held by the CSSF
Mere AIFM notification to the CSSF (Circular
15/612), onward information to ESMA
Mere AIFM notification to the
CSSF (Circular 15/612),
onward information to ESMA
Publication in the RESA*
Constitutional documents:
No CSSF approval of constitutional documents
required
Notary deed: depending on the chosen corporate
form
The constitution of a RAIF shall be subject to a
formal ex-post declaration before notary
Constitutional documents:
Approval by the CSSF of the constitutional documents (prospectus and
articles/ManRegs) and service agreements
Notary deed: depending on the chosen corporate form
Constitutional documents:
No CSSF approval of
constitutional documents
(articles) and service
agreements
Changes to constitutional documents subject to CSSF approval
Notary deed for articles
Changes to constitutional documents without
regulatory approval
Luxembourg Reserved Alternative Investment Fund (RAIF) – The best of two worlds? │ July 2016
* Recueil Electronique des Sociétés et Associations, to be further detailed in a Grand Ducal Regulation
23
Tax regime.
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Tax regime.
RAIF
SIF-AIF
SICAR-AIF
SOPARFI-AIF
What is the level of taxation?
Capital duty:
Fixed capital duty of €75 upon incorporation and subsequent articles changes
Corporate Tax:
Not subject to corporate income tax
(SIF tax regime)
Corporate Tax:
Not subject to corporate
income tax
Exception:
If investing only in risk capital, full
liability to corporate income tax but
exclusion from taxable profits of any
income (dividends, capital gains, …)
realised on securities or funds drawn
for investment (within 12 months)
(SICAR tax regime)
Subscription Tax:
Subject to yearly subscription tax of
1bp on net asset value but 0 bp if
investment in (i) another fund subject
to subscription tax or (ii) in a money
market or (iii) microfinance fund or (iv)
pension fund pooling vehicle (SIF tax
regime)
Exception:
If investing only in risk capital, no
subscription tax (SICAR tax regime)
Corporate Tax:
Save for SCS (tax transparent), full
liability to corporate income tax
Corporate Tax:
Subject to regular corporate and
municipal business tax
Exclusion from taxable profits of any
income (dividends, capital gains, …)
realised on securities or funds drawn
for investment (within 12 months)
Subscription Tax:
Subject to yearly subscription
tax of 1bp on net asset value
but 0 bp if investment in (i)
another fund subject to
subscription tax or (ii) in a
money market or (iii)
microfinance fund or (iv)
pension fund pooling vehicle
Subscription tax:
No
Subscription tax:
No
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Tax regime.
RAIF
SIF-AIF
SICAR-AIF
SOPARFI-AIF
What is the level of taxation?
NWT:
Not subject to NWT (SIF tax
regime)
NWT:
Not subject to NWT
NWT:
NWT exempt save the flat
minimum NWT liability (as from 1
January 2016 – Law of 18
December 2015)
NWT:
Subject to NWT of 0.5% on Net
Asset Value (minimum NWT
always due)
Exception:
If investing only in risk capital, NWT
exempt save the flat minimum
NWT liability (as from 1 January
2016 – Law of 18 December 2015)
(SICAR tax regime)
VAT:
VAT exemption on management services
WHT:
No withholding tax on distributions
WHT:
15% WHT on dividends
DTT:
DTT:
DTT:
DTT:
If subject to SIF tax regime, in
principle no double tax treaties
elibility (subject to a few exceptions)
In principle no double tax treaties
elibility (subject to a few exceptions)
In principle double tax treaties
eligibility
Eligible to double tax treaty
If subject to SICAR tax regime, in
principle double tax treaties eligibility
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Contacts
Please liaise with your usual Linklaters contacts
Luxembourg Reserved Alternative Investment Fund (RAIF) – The best of two worlds? │ July 2016
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Linklaters LLP Luxembourg
35, Avenue John F. Kennedy
L-1855 Luxembourg
Tel: +352 2608 01
Fax: +352 2608 8888
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Disclaimer: This brochure is intending to provide an overview of the main features of a Reserved Alternative Investment Fund (‘RAIF’) compared to a Specialised Investment Fund (‘SIF’), an Investment Company in Risk Capital (‘SICAR’) and a Soparfi. It is
not intended to be comprehensive nor does it constitute any legal advice.