To our readers: Paperjam is bringing you a series marking the tenth anniversary of Raif. This first article is the opening instalment of the series.
To understand the Raif, we need to go back to 2013 and the transposition of the AIFMD into Luxembourg law. This directive introduced a principle that would change everything: the regulation of alternative investment fund managers (AIFMs), rather than the funds themselves. This marked a radical break with the logic that had prevailed until then, that of the Ucits Directive, where the product was at the heart of supervision.
Initially, the European Commission’s proposal focused on regulating hedge funds, i.e. traditional product regulation. As negotiations progressed, the approach shifted: the rule now is to authorise and supervise the manager and allow them the freedom to create the funds they need. This shift, which came as a surprise to the industry at the time, opened up an opportunity that Luxembourg seized three years later.
It was the AIFMD, as the governing regulation, that shifted the focus to AIFMs. This was a new development for the fund industry. The Raif is a direct consequence of this new approach.
In 2016, the Luxembourg legislature applied this approach to a vehicle that had been operating very successfully since the 2000s: the Specialised Investment Fund (SIF). The idea is simple and radical: to retain all its structural features, remove the requirement for direct approval by the Financial Sector Supervisory Commission (CSSF), and make its existence conditional upon the presence of a fully authorised external AIFM. The Raif was born.
What the RAIF actually delivers
Four key benefits immediately won over the market, and they remain just as relevant today as they were in 2016.
The time-to-market. Once the AIFM has been authorised, launching an AIF does not require approval from the regulator. The fund’s constitutional documents do not need to be certified by a solicitor; only a notarial certificate confirming the fund’s creation is required, along with publication in the official publication Mémorial. It is the time taken to establish the legal structure that dictates the timetable.
The cost. The Raif incurs lower costs than authorised structures. The absence of a direct approval process by the CSSF translates into real savings for managers. This has become a decisive factor for mid-sized players, who have no intention of taking on a cumbersome regulatory infrastructure.
Investment flexibility. The Raif can invest in virtually any asset class: private equity, property, private debt and infrastructure. It also allows for more specialised strategies, such as digital assets, impact investing, aviation, shipping, etc. There are no restrictions on investment choices.
The European passport. As an alternative investment fund (AIF) managed by an authorised external AIFM, the Raif automatically benefits from the European passport. This allows it to be marketed to all professional investors across the European Union without the need for additional country-specific procedures. This is a considerable advantage for managers seeking to raise capital on a European scale.
A decade in figures
The statistical trajectory of Raif is unmistakably upward. Starting from scratch in July 2016, the vehicle experienced explosive growth during its first six years. This growth has been driven by a combination of favourable factors: historically low interest rates pushing institutional investors towards higher-yielding alternative assets, and the emergence of third-party ManCos as a dedicated service infrastructure.
According to the official list in the commercial register, the number of Raifs rose from 43 at the time of its launch in 2016 to a cumulative total of 1,181 vehicles by the end of 2020. Ten years after its creation, the official list recorded 3,354 Raifs as at 4 May. The specific assets under management of Raifs are not published separately in the official statistics. ALFI estimates the total assets under management of the entire Luxembourg fund industry, including Ucits and AIFs, at €8.299bn in January.
The breakdown by asset class reflects the main trends in the private assets market: private equity accounts for 49%, followed by real assets and property at 22%, private debt at 20% and funds of funds at 9%.
Raif and Sif: complementary, not competing
One question comes up time and again: has the Raif cannibalised the Sif? Alfi’s response is nuanced. “The two vehicles operate in distinct segments, meeting different needs,” says Susanne Weismüller, Alfi’s senior vice president of legal affairs.
The SIF remains the preferred choice when an investor wishes to give the fund greater commercial authority through its direct authorisation by the CSSF. Some institutional investors, subject to strict investment rules or wishing to have explicit regulatory approval, still prefer this route. For those prioritising speed, flexibility and cost, the Raif is the natural choice, provided they have a pre-authorised AIFM.
Raif stands out from other products that require regulatory approval and differs from ordinary companies, which cannot be structured as sub-funds. Its steady growth is a testament to its success.
A framework that has been refined
Far from having remained static since 2016, the legal framework for the Raif has been regularly improved. The 2023 Fund Modernisation Act introduced several significant changes.
The minimum investment threshold for experienced investors has been lowered from €125,000 to €100,000, in line with other European schemes.
The dual notarial requirement: The initial drafting error, which had no practical significance, has been removed. Furthermore, the possibility of marketing Raifs to sophisticated non-professional investors in Luxembourg has been clarified.
On 16 April 2026, AIFMD II came into force. Its impact on Raifs remains limited and, above all, indirect. The new obligations place a burden on their managers, particularly with regard to liquidity management tools and information on delegation.
One exception: Raifs that originate loans are subject to new minimum requirements (diversification of borrowers, leverage limits, and a 5% risk retention requirement).
Finally, Raifs can now apply for the Eltif (European Long-Term Investment Fund) label. Although Raifs as such are not subject to approval by the CSSF, if a Raif wishes to use the Eltif label, it must submit an application to the regulator in accordance with the relevant European regulation.
Investor profile
Shares in a Raif may only be subscribed to by sophisticated investors, a category that includes institutional and professional investors, as well as any other investor who confirms in writing that they meet this criteria and invests a minimum of €100,000.
In practice, the investor base consists mainly of institutional and semi-institutional investors: pension funds, insurance companies, sovereign wealth funds, family offices, private banks, fund-of-funds managers, endowments and foundations, and ultra-high-net-worth individuals (UHNWIs).
It remains, at its core, a tool for sophisticated investors, designed to meet complex structuring needs within a robust regulatory framework.
Outlook: maturity, not the peak
Looking back over the past ten years, Alfi observes a natural transition: the Raif is entering a phase of maturity. Growth will no longer be exponential. This was partly a catch-up effect, given the previous absence of such an investment vehicle. From now on, growth will be steady and robust, underpinned by sound fundamentals. Investors want the product. Managers have good reasons to use it. And the financial centre has successfully built a first-class infrastructure around it: lawyers, ManCos, custodians, fund administrators and auditors. This constitutes its real competitive advantage over other European jurisdictions.
At a time when other countries are seeking to strengthen their own regulatory frameworks for alternative investment funds, the Raif remains a key component of Luxembourg’s regulatory toolkit.
“Since its launch, it has even inspired other legislators. This is undoubtedly the best proof that the 2016 innovation has spread beyond the borders of the Grand Duchy,” concludes Susanne Weismüller.
To our readers: having reviewed the development of the Raif, this second article will look back at its origins through the eyes of one of its key architects, the lawyer Jacques Elvinger.
