RAIF – Lux Unregulated AIF Ezechiel Havrenne International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
Index 1. Background: Lux recognised position / time-to-market need 2. Basic Luxembourg fund concepts 3. RAIF structures International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
1A. Lux Recognised position International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
1A. Lux Recognised Position - Size of investment fund industry: Luxembourg is the 2 nd largest fund jurisdiction after the USA - - AuM of Luxembourg funds over EUR 3.5 trillion - Market shares of fund initiators by country of origin: #1 USA (over 20%) ; #2 UK (17%); #3 Germany (15%); and #4 Switzerland (14%) - Cross-border distribution: - Luxembourg is the leading centre for cross-border distribution of investment funds with 67% of the European market - Luxembourg-domiciled investment funds are distributed in more than 70 countries throughout the world. They are recognised everywhere, including in Asia, Latin America and the Middle East. International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
1B. Lux Recognised Position – RAIFs - Available tools pre RAIF law : * SCS/SCSp * SIFs * SICARs * UCI Part II - Problem : time-to-market + umbrella + tax efficiency put together - Solution : RAIF * Quick time-to-market * EU marketing passport * Well-informed investors + professional investors * Flexible investment policy and restrictions * Umbrella with ring-fencing * Tax efficient International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
1C. RAIFs must be managed by an authorised AIFM - AIFMD passport Shares/partnership interests of my RAIF can be marketed to professional investors in the EEA through the AIFM passport because my RAIF must be managed by an authorised AIFM irrespective of reaching the de minimi thresholds of EUR 100 or 500 million International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
Index 1. Background: Lux recognised position / time-to-market need 2. Basic Luxembourg fund concepts 3. RAIF structures International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
2.Basic Luxembourg umbrella AIF concepts NautaDutilh’s “M&M Candy” analogy… International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
2 .A. The constitutive elements… Compartments? Partnership - Wrappers? Assets? SICAV? SIF SCSp SICAR SCS RAIF SCA International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
2.B. Partnerships? SCSp SCS - Which one to chose? SCA * Depends mainly on tax considerations at the level of - Your investors ( e.g. Belgian Institutional Investors often prefer investing in an SCSp because of tax considerations (double deduction)) - Your investments (depending on the asset and the jurisdiction direct or indirect investments will be considered) * Depends also on level of anonymity sought and limited investor involvement International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
2.C. Compartments? - Can a regular SCA/SCS/SCSp, a SIF, a SICAR or a RAIF have one or more compartments? - Corporate governance advantage and BEPS considerations - Are compartments ring-fenced? - How quickly can we set one up? International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
2.D. Wrappers? SIF RAIF SICAR - Which one to chose? * RAIF: RAIF is unregulated and therefore… no approval delay – great time-to- - market product! - Can be set-up with one or more compartments * SIF and SICAR: - Lightly regulated and supervised by the CSSF - Time-to-market pointers - Possibility to start with a RAIF and end-up with a SIF or SICAR after conversion if needed International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
2.E. Wrappers – general considerations SICAR SIF RAIF - Main points: * Eligible investors - institutional / professional investors; and “other well - informed investors” (EUR 125k min or assessment) - * Diversification for SIFs and RAIFs of the SIF type - No asset may in principle represent more than 30% of SIF/RAIF of the SIF type portfolio after ramp-up period (usually up to 4 years after final closing); and - Look-through approach * Eligible asset requirement for SICARs and RAIFs of the SICAR type * Compartments - Possible + ring-fencing * SICAV Variable capital – i.e. no notary public for capital increase/decrease - International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
Index 1. Background: Lux recognised position / time-to-market need 2. Basic Luxembourg fund concepts 3. RAIF structures International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
3. Lux AIFs investing in private equity - Legal and regulatory aspects Available Structures: * Subject to a special regime: Regulated and Unregulated AIFs - Part II Funds (UCI/UCITS Law) - REGULATED • FCP and SICAV (SA being the only form available) - SIFs (SIF Law) - REGULATED • FCP and SICAV (SCA, SCS and SCSp) - SICARs (SICAR Law) - REGULATED • SICAV (SCA, SCS and SCSp) - RAIFs (RAIF Law) - UNREGULATED • FCP and SICAV (SCA, SCS and SCSp) • Can work like a SIF or a SICAR NB: umbrella structure only possible in AIFs subject to a special regime * Not subject to a special regime: Unregulated AIFs only - SCS and SCSp (can be made to work like SICAVs) - SCA (more structuring needed as cannot work like a SICAV) International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
3A. RAIFs of the SIF type – Legal and regulatory aspects FCP / SICAV? : most likely SICAV. Why? • non-UCITS FCP not popular anymore in Germany • easy to replicate SCA and SCS/SCSp WII PI Investments : • no more than 30% of the NAV in any single asset (but ramp-up and down) (see next slide on look-through) Lux Borrowing limits : no particular limit imposed by RAIF RAIF law (SIF type) Investors : • Well- Informed Investors (“ WII ”) Minimum investment = in principle EUR 125,000 but assessment possible by AIFM/bank • Professional investors (“ PI ”) SPV(s) Main documents : • PPM • Articles/LPA/Management Regulations • Annual report: AIFMD rules + specific rules Portfolio Closed or open-ended Company(ies) Great time-to-market product as it is not subject to prior CSSF approval International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
3B. RAIFs of the SIF type – Legal and regulatory aspects Look-through notion: • a RAIF of the SIF type invests in a target through a wholly-owned SPV or an SVP it controls; • two or more funds (one of which being a RAIF of the SIF type) hold shares in the same SPV and together control it inasmuch as the GP of the RAIF of the SIF type and of the other funds is the same for all (further exceptions have been granted in this field on a case-by-case basis); or • a RAIF of the SIF type invests in one or more target UCIs subject to risk- spreading requirements at least comparable to those applicable to RAIFs of the SIF type. International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
3C. RAIFs of the SICAR type – Legal and regulatory aspects FCP / SICAV? : most likely SICAV. Why? • non-UCITS FCP not popular anymore in Germany • easy to replicate SCA and SCS/SCSp WII PI Investments : same restrictions as SIF or SICAR (as the case may be) Lux Borrowing limits : no RAIF Investors : (SICAR type) • Well- Informed Investors (“ WII ”) Minimum investment = in principle EUR 125,000 but bank assessment possible • Professional investors (“ PI ”) SPV(s) Main documents : • Prospectus • Articles/LPA/Management Regulations • Annual report: AIFMD rules + specific rules Closed or open-ended Portfolio Company(ies) Great time-to-market product as it is not subject to prior CSSF approval International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
3D. RAIFs of the SIF type – Tax aspects Quid RAIF umbrella with one SIF type compartment and one SICAR type compartment? • Not possible to opt for the tax treatment WII PI applicable to RAIFs of SICAR type Exemption from: Lux • Corporate income and municipal business tax RAIF • Net wealth tax (SIF type) Distributions exempt from withholding tax No taxation on capital gains on shares realized by non-resident investors Annual Subscription tax: 0.01% on net asset SPV(s) (exemptions assessed on a per-compartment basis) Limited access to double tax treaties (about 36 applicable to RAIFs of the SIF type) Portfolio No access to EU tax directives Company(ies) VAT: exemption on management and advisory services provided to the RAIF of the SIF type International Law Firm | Amsterdam · Brussels · London · Luxembourg · New York · Rotterdam
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