What regulatory change is the biggest opportunity for Luxembourg's alternative funds sector in 2019?

In the funds' space, Luxembourg is an attractive place to do business for various reasons, such as its pragmatic regulator or its skilled and multi lingual workforce. A further advantage of Luxembourg was its relatively straight-forward legal and regulatory framework. Basically, in the alternative investment fund (AIF) world, you had the choice between the specialized investment fund (SIF), fully regulated by the CSSF, and a non-regulated AIF.

Then came long the restricted alternative investment fund (RAIF) which, on paper, was the "best of both Worlds" i.e., exactly in the middle between the SIF and the non-regulated AIF. The RAIF was created as an answer to the market's demand for a flexible vehicle with a reduced time-to-market. The RAIF is offering features until then only available to fully regulated AIFs such as segregated cells and variable capital. Hence, it should have been a great success.

However, has it been? We think that it created confusion in the mind of the fund sponsors as to which is the right choice of vehicle for them. If your investors require a regulated vehicle, the choice is easy. If they do not, what is really the advantage of using a RAIF versus for instance a non-regulated SCSp?

On top of that, Luxembourg wants to further enhance its attractiveness with the creation of a Luxembourg "REIT". Do we really need an additional vehicle? The once so important clear offer of the Luxembourg "toolbox" is becoming ever more confusing.

What's more? Real opportunities for Luxembourg exist when introducing new technologies in the world of funds, such as blockchain technologies for transfer agency tasks. These areas should attract all of attention and we should focus all our creativity on them, to remain ahead of the curve.

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