Luxembourg RAIF Sub-Fund formation
Luxembourg is a well-known hub for investment funds, and the recent introduction of the Reserved Alternative Investment Fund (RAIF) sub-funds has made it even more attractive for both investors and fund managers. A Luxembourg RAIF sub-fund offers several benefits for both parties, making it a highly desirable investment vehicle. This article will provide a comprehensive guide to Luxembourg RAIF sub-funds, including the benefits for both investors and founders.
Benefits for Founders: Increased Flexibility, Low Cost, and Speed of Establishment
One of the key benefits of setting up a Luxembourg RAIF sub-fund is increased flexibility and low set up cost. Unlike traditional investment funds, a RAIF sub-fund does not require prior authorization from the CSSF (the Luxembourg financial regulatory body). This means that the fund can be established much more quickly, typically within a matter of a few weeks, rather than months or even years. Moreover, the entire setup cost is under CHF 75,000.
In addition to this, RAIF sub-funds offer a more flexible structure than traditional funds. This allows the fund manager to tailor the fund to their specific investment strategy, without being limited by restrictive regulations. This increased flexibility also makes it easier for the fund manager to respond to market changes and adapt their investment strategy as required. Moreover, the sub-fund is branded to the business of the sub-fund, not to the parent fund.
Benefits for Investors: Tax Efficient Investment Vehicles with High Potential Returns
Luxembourg RAIF sub-funds offer several benefits for investors. Firstly, they are highly tax efficient. The Grand Duchy of Luxembourg has a favorable tax regime for investment funds, and this extends to RAIF sub-funds. As a result, investors can benefit from lower tax bills compared to traditional investment vehicles.
In addition, RAIF sub-funds have the potential to deliver high returns. The lack of restrictive regulations means that fund managers have greater flexibility to pursue their investment strategy, potentially leading to higher returns for investors. Furthermore, the absence of prior authorization from the CSSF means that the fund can be established more quickly, allowing the fund manager to start investing sooner and potentially generating returns for investors more quickly.
Investment Protection through Transparency and Governance
Investment protection is a key concern for all investors, and Luxembourg RAIF sub-funds offer several measures to ensure that investments are protected. Firstly, RAIF sub-funds are required to appoint a depositary, which acts as a watchdog over the fund’s assets. This provides a layer of protection for investors, as the depositary is responsible for ensuring that the fund’s assets are properly safeguarded.
In addition, RAIF sub-funds are subject to transparency and governance requirements. This means that the fund must publish regular financial statements and reports, providing investors with an accurate picture of the fund’s performance and enabling them to make informed investment decisions.
Luxembourg RAIF sub-funds offer a highly desirable investment vehicle for both investors and founders. The increased flexibility and speed of establishment for founders, combined with the tax efficiency and high potential returns for investors, make them an attractive choice. In addition, the transparency and governance requirements provide investors with protection and peace of mind. If you are considering setting up a fund or investing in one, a Luxembourg RAIF sub-fund is definitely worth considering.