The newly–enacted Reserved Alternative Investment Fund legislation has given Luxembourg a next-generation alternative investment fund regime. SGG Luxembourg’s Managing Director, Jean-Marie Bettinger and Fund Services Leader, Anja Grenner explain why the RAIF regime represents an effective response to AIFMD requirements after years of product-based regulation.
What does the approval of the RAIF law mean for Luxembourg as a global fund centre?
Anja Grenner: Luxembourg has traditionally relied on a framework of product regulation - for UCITS as well as AIFs - which obviously was state-of-the-art in the pre-AIFMD era, involving regulated funds and obligatory additional supervision via a depositary. Other jurisdictions such as the UK and Germany had a different model involving unregulated limited partnerships or companies. When the AIFMD moved regulation from product to manager level, Luxembourg found itself with regulation at both levels, which proved cumbersome and expensive. However, Luxembourg’s policy-makers have been quick to put together a vehicle that incorporates features of the SIF and SICAR, but without the need for the approval and supervision of structures that have appointed a regulated AIFM. The RAIF is more lightly regulated, quick-to-market and AIFMD-compliant.
The RAIF is more lightly regulated, quick-to-market, and AIFMD-compliant.
Anja Grenner, SGG
How will these changes affect your clients?
Jean-Marie Bettinger: The new regime will have a positive impact on prospects that have been eagerly awaiting its implementation. There has been an increasing demand in the establishment of Luxembourg AIFs from Private Equity and Real Estate clients, for which time-to-market is critical. Our operational teams are ready to onboard and service these vehicles both quickly and efficiently.
AG: In addition, I also expect that some of our existing clients will want to convert their Luxembourg structures. Those with SIFs and SICARs will benefit from a quicker turnaround and reduced costs if they convert their regulated funds to RAIFs. Meanwhile, firms with unregulated limited partnerships that have appointed an AIFM for marketing purposes may want to convert them into RAIFs in order to be able to create structures with sub-funds.
We are ready to onboard and service these vehicles both quickly and efficiently.
Jean-Marie Bettinger, SGG
How is SGG positioning itself for the introduction of RAIFs?
JMB: Our team leaders are assessing the overall needs of each client and whether RAIFs could enhance their existing structures and provide value to their investors. SGG is one of the few players in Luxembourg that offers central administration, depositary and third-party AIFM services. We are able to bring a unique value proposition to our Luxembourg and international clients, either on the basis of a one-stop shop solution or through an open-architecture scenario.
AG: We are not lawyers, nor tax consultants, but we wish to bring the RAIF to the attention of our existing clients and make prospects aware of its advantages. On the administrative side, fortunately RAIFs function along the same lines as SIFs and SICARs, so all the necessary services are already in place. This said, the flip side of not having to obtain approval from the CSSF places a much greater responsibility on service providers. Previously, administrators relied to a certain extent on the CSSF’s authorisation. Now, with the RAIF, the assessment is conducted exclusively at the level of the administrator or AIFM, possibly in closer cooperation with the auditor and compliance department, as well as specialists in each industry segment.