The RAIF, Reserved Alternative Investment Fund - Expert Views
The RAIF - Expert Views
The Reserved Alternative Investment Fund RAIF is a non-regulated Luxembourg collective investment vehicle. What are its features? What objectives does it meet? Which client profiles is it aimed at? What are the legal and tax aspects? How does Societe Generale Private Banking mobilise its expertise in this area? An overview with Pierre-Frédéric Stein, Head of Wealth Planning and Business Development at Societe Generale Private Banking Luxembourg.For investors the world over, Luxembourg offers a secure and attractive investment environment. Its political and economic stability, as well as its regulatory framework, have always been fertile ground for new and innovative financial solutions and services, right in the heart of Europe. Today, Luxembourg is a major centre for alternative investments. The reserved alternative investment fund known as RAIF is a perfect example.
RAIF: definition
The RAIF is an unregulated collective investment vehicle created in 2016. It is governed by the AIFM directive aimed at establishing a standardised regulatory framework for alternative funds distributed in the European Union. The RAIF is both flexible and agile:
- Flexible, because it can invest in all types of asset classes
- and agile, because it can be constituted and operational within a few weeks, while still managed by an AIFM - an alternative investment fund manager.
And this is the innovation of the RAIF.
Comparatively speaking, traditional Luxembourg funds, like UCITS and specialised investment funds (FIS) require the authorisation of the regulator before going to market - a procedure than can take up to several months.
For which purposes and for which client profiles?
In practical terms, the RAIF can invest in any asset class: real estate, private equity, infrastructure, debt acquisition, and in all types of listed securities. The RAIF is basically for well-informed investors, specifically institutional investors. But in practice, big families and private investors have started constituting RAIFs. Big families - alone or as a group (in the form of a club deal – like Family and Friends) have started structuring RAIFs for their real estate and private equity investments, as well as other assets, such as artworks and collectable cars.
What are the legal and tax aspects of the RAIF?
From a legal perspective, the RAIF can be structured as a fund (like an FCP common contractual fund), or as a company.
RAIFs are mostly constituted as companies in Luxembourg, affording investors the full benefit of Luxembourg’s flexible company laws, and allowing them to address formative topics, such as shareholder arrangements, and ensuring the trans-generational nature of family business governance. From a tax perspective, the RAIF falls under one of two tax regimes:
- By default, the “FIS” regime, whereby the fund is not subject to corporate tax, but to a basic subscription tax equal to 0.01% of net assets invested in the fund.
- And, as an option, the “SICAR” regime, if the purpose of the fund is to invest predominantly in capital risk. In this case, the RAIF is subject to corporate tax under certain conditions.
The RAIF forms part of the Luxembourg legislator’s efforts to provide investors with a neutral tax framework. As such, there is no withholding tax on RAIF dividend pay-outs, capital gains or liquidation surpluses. And if constituted as a company, the RAIF is eligible to most of the tax agreements signed by Luxembourg.
A dedicated department within SGPB Luxembourg
Given the RAIF’s popularity among private investors, Societe Generale Luxembourg has synergised the skills of its different business lines to provide an integrated private-banking service offering to support the distribution of wealth funds. The offering all includes trust and custodian banking services. We also have a dedicated asset management company, Societe Generale Private Wealth Management, which mobilises its expertise to offer responsible and innovative financial solutions for managing your wealth. With Societe Generale Private Wealth Management acting as intermediary, we take the role of Management Company or AIFM of wealth funds investing in classic financial strategies or in Private Equity. Lastly, our team of wealth engineers oversee the implementation and management of this adaptable wealth strategy. Want to find out more about the RAIF? Our teams at Societe Generale Private Banking are waiting to hear from you.
For investors the world over, Luxembourg offers a secure and attractive investment environment. Its political and economic stability, as well as its regulatory framework, have always been fertile ground for new and innovative financial solutions and services, right in the heart of Europe. Today, Luxembourg is a major centre for alternative investments. The reserved alternative investment fund known as RAIF is a perfect example.
RAIF: definition
The RAIF is an unregulated collective investment vehicle created in 2016. It is governed by the AIFM directive aimed at establishing a standardised regulatory framework for alternative funds distributed in the European Union. The RAIF is both flexible and agile:
- Flexible, because it can invest in all types of asset classes
- and agile, because it can be constituted and operational within a few weeks, while still managed by an AIFM - an alternative investment fund manager.
And this is the innovation of the RAIF.
Comparatively speaking, traditional Luxembourg funds, like UCITS and specialised investment funds (FIS) require the authorisation of the regulator before going to market - a procedure than can take up to several months.
For which purposes and for which client profiles?
In practical terms, the RAIF can invest in any asset class: real estate, private equity, infrastructure, debt acquisition, and in all types of listed securities. The RAIF is basically for well-informed investors, specifically institutional investors. But in practice, big families and private investors have started constituting RAIFs. Big families - alone or as a group (in the form of a club deal – like Family and Friends) have started structuring RAIFs for their real estate and private equity investments, as well as other assets, such as artworks and collectable cars.
What are the legal and tax aspects of the RAIF?
From a legal perspective, the RAIF can be structured as a fund (like an FCP common contractual fund), or as a company.
RAIFs are mostly constituted as companies in Luxembourg, affording investors the full benefit of Luxembourg’s flexible company laws, and allowing them to address formative topics, such as shareholder arrangements, and ensuring the trans-generational nature of family business governance. From a tax perspective, the RAIF falls under one of two tax regimes:
- By default, the “FIS” regime, whereby the fund is not subject to corporate tax, but to a basic subscription tax equal to 0.01% of net assets invested in the fund.
- And, as an option, the “SICAR” regime, if the purpose of the fund is to invest predominantly in capital risk. In this case, the RAIF is subject to corporate tax under certain conditions.
The RAIF forms part of the Luxembourg legislator’s efforts to provide investors with a neutral tax framework. As such, there is no withholding tax on RAIF dividend pay-outs, capital gains or liquidation surpluses. And if constituted as a company, the RAIF is eligible to most of the tax agreements signed by Luxembourg.
A dedicated department within SGPB Luxembourg
Given the RAIF’s popularity among private investors, Societe Generale Luxembourg has synergised the skills of its different business lines to provide an integrated private-banking service offering to support the distribution of wealth funds. The offering all includes trust and custodian banking services. We also have a dedicated asset management company, Societe Generale Private Wealth Management, which mobilises its expertise to offer responsible and innovative financial solutions for managing your wealth. With Societe Generale Private Wealth Management acting as intermediary, we take the role of Management Company or AIFM of wealth funds investing in classic financial strategies or in Private Equity. Lastly, our team of wealth engineers oversee the implementation and management of this adaptable wealth strategy. Want to find out more about the RAIF? Our teams at Societe Generale Private Banking are waiting to hear from you.
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