To our readers: this article is the third instalment in our series marking the 10th anniversary of Raif.
The Reserved Alternative Investment Fund (Raif) did not originate in Brussels, but in Luxembourg. The Raif is a home-grown creation: an initiative of the financial centre, driven by lawyers, professional associations and the legislator. Created in 2016, in the wake of the AIFM Directive and its transposition into Luxembourg law in 2013, the Raif introduced a shift in approach. The fund itself is not directly authorised by the financial sector supervisory commission (CSSF). Instead, it must be managed by an authorised alternative investment fund manager (AIFM).
“It is not the vehicle that is directly controlled, but its manager,” sums up 
The result has become one of the AIFM’s key selling points: time-to-market. Once the AIFM has been authorised, the fund can be launched and then benefit from the AIFMD passport to be marketed to professional investors across the European Union.
The Raif can be structured as an ‘umbrella platform’, with several separate portfolios.
Raif-SCSp: the legal framework of private markets
For corporate lawyers, the Raif has thus become a key structuring tool. It can take several legal forms: a special limited partnership (SCSp) or a limited partnership with share capital (SCA). It lends itself to a wide range of strategies, including private equity, private debt, real estate, infrastructure and continuation funds.
Another key strength lies in the ability to create compartmentalised structures. “The Raif can be structured as an ‘umbrella platform’, with several separate portfolios,” the lawyer points out. This is a crucial feature for asset managers who wish to combine multiple strategies within a single legal framework.
In practical terms, an ‘umbrella platform’ allows a single investment vehicle to house several independent sub-funds, each with its own investors, assets, strategy and risk profile, provided that the overall and operational consistency of the whole is maintained.
The manager can therefore use a single platform to house several successive funds under the same investment strategy. A sub-fund may, for example, house an initial private equity fund, followed by a second fund launched a few years later, without requiring the creation of a new structure for each fundraising round. The risks remain legally segregated: any difficulties faced by one sub-fund do not affect the others.
Raif has also benefited from the growing popularity of the SCSp, which was introduced into Luxembourg law as a highly flexible form of company, similar to Anglo-Saxon ‘limited partnerships’.
This combination of Raif and/or SCSp has enabled Luxembourg to meet the expectations of major international fund managers, who are accustomed to structures based in Delaware or the United Kingdom.
The strength of the platform lies in its ability to capitalise on the opportunity presented by this vehicle by offering the entire value chain – from lawyers to custodians, via managers and auditors.
Sif, Sicar, Raif: a shifting boundary
However, the Raif has not entirely replaced SIFs and Sicars. Some investors still prefer a vehicle directly regulated by the CSSF, particularly for the regulatory certainty this provides. “But in practice, the Raif has clearly shifted part of the market towards a faster approach that is more in line with the indirect regulation of investment vehicles through their managers,” notes Carl de La Chapelle.
From a tax perspective, the vehicle remains structured around a key principle: neutrality. A Raif may opt for the SIF regime, in which case it is exempt from the main Luxembourg taxes, subject to an annual subscription tax of 0.01%, or choose the SICAR regime when investing in venture capital.
This flexibility contributes to its growth, as does the expertise now possessed by the entire Luxembourg ecosystem: lawyers, auditors, custodians, fund managers and AIFMs.
Ten years of regulatory changes
The regulatory framework has evolved over time. The 2023 Modernisation Act lowered the investment threshold for sophisticated investors from €125,000 to €100,000 and extended the timeframe for reaching the minimum capital requirement of €1,250,000 to 24 months (instead of 12). Other developments, such as AIFMD 2 or the new clarifications on debt funds, also serve to strengthen the environment in which Raifs operate.
AIFMD 2 provides greater clarity for private debt funds, one of the most dynamic segments of the alternative markets. The directive harmonises, at European level, the rules applicable to funds that directly grant loans (‘loan origination funds’), particularly with regard to risk management, diversification, risk retention and leverage limits.
For Luxembourg-based practitioners, these clarifications enhance legal certainty around an activity that is already widespread within Raif structures. The next regulatory step could involve the democratisation of private assets, Eltifs or even tokenisation. “For the time being, the latter is still more commonly seen in liquid funds than in Raifs, which are traditionally associated with illiquid strategies,” explains Carl de La Chapelle.
Faced with competition from Ireland, Malta and other financial centres, Carl de La Chapelle believes that “Luxembourg’s advantage lies not only in the vehicle itself, but in the infrastructure surrounding it. The strength of the financial centre lies in having fully seized the opportunity presented by this vehicle by offering the entire value chain surrounding it (lawyers, custodians, managers, auditors, etc.).”
Once the growth phase is over, it’s time for standardisation
After a decade of strong growth, the Raif is now entering a phase of standardisation. The vehicle is well known, well understood and widely accepted by the market.
For Carl de La Chapelle, its success demonstrates above all the legal innovation capacity of the jurisdiction: “The RAIF has been a symbol of Luxembourg’s legislative creativity and adaptability in the field of alternative funds.”
To our readers: having examined the legal mechanisms that have contributed to the success of the Raif, the next article will look at the role of management companies and AIFMs in its development.
