LUXEMBOURG LIMITED PARTNERSHIPS AND RAIFS ARE ON THE RISE

Author: Susanne Weismüller, Senior Legal Adviser, ALFI

Two Luxembourg vehicles have shown an impressive development since their inception: the special limited partnership (SLP, or abbreviated in French as SCSp) and the reserved alternative investment fund (RAIF).

Looking at the evolution since the beginning of this year, the total number of Luxembourg SLPs increased from 1702 in January to 2015 in June. Since the first RAIF was created in August 2016, the number of RAIFs has risen to 463 entities in July 2018.

What are the drivers behind this development?

Neither SLPs in the form of normal companies nor RAIFs require fund approval from the Luxembourg regulator. Time to market is key for many investors. The SLP, which has no legal personality, is incorporated via a partnership agreement by private seal. For the RAIF, a public notary must be involved in establishing the fund.

Whereas the RAIF is always set up as investment fund, the special limited partnership can either be set up as fund vehicle  (including master-feeder structures) or as a normal company (as acquisition vehicle, carry vehicle, co-investment vehicle, etc.). From an investment perspective, it is chosen for a limited number of investors that often know each other. The General Partners are fully personally liable while the Limited Partners’ liability is limited to their contribution to the partnership.

It is worth noting that RAIFs, which are only open to well-informed investors, must be managed by an authorised external alternative investment fund manager. The latter is subject to the EU framework for alternative investment funds (the AIFMD) and hence reports on the RAIF’s investments on a regular basis. As the vehicle is suitable for all types of investment and can be set up as umbrella fund with multiple compartments and share classes, it is a true alternative to Luxembourg SIFs or SICARs. RAIFs can exclusively invest in risk capital (like SICARs) or be risk diversified (like SIFs), which entails different tax regimes for the one and other case.

After all, the two vehicles were not introduced to challenge existing fund structures. There are good reasons for all the different investment vehicles available in Luxembourg. A suitable investment decision depends on a profound analysis of the targeted investors and markets.

 



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