FARAD Group launches its own RAIF platform through its company SELECTRA

FARAD Group launches its own RAIF platform through its company SELECTRA

FARAD Group, the Luxembourg-based B2B funds, asset management and insurance platform is delighted to announce the recent launch by its management company SELECTRA, of its own RAIF platform called “Magnetica SICAV-RAIF”.

In 2011, the entry into force of Alternative Investment Fund Managers Directive (“AIFMD”) has resulted in Luxembourg, in a double layer of regulation and supervision: one at the level of the AIF through the Commission de Surveillance du Secteur Financier (the CSSF) and one at the level of the appointed AIFM.

Reflecting the need for greater efficiency, Luxembourg has therefore adopted the law of 23 July 2016 on reserved alternative investment funds (the RAIF Law), creating a new type of unregulated vehicle meeting the expectations of certain types of investors.

Largely inspired by the existing Luxembourg SIF Law and the Luxembourg SICAR Law, the RAIF Law offers the advantages of specialised investment funds (fonds d’investissement spécialisé or “SIF”) or investment companies in risk capital (sociétés d’investissement d’investissement en capital à risque or “SICAR”) in terms of structuring (for instance the ability to adopt a variable capital structure and to establish sub-funds) but is not required to seek the prior authorisation of the Luxembourg supervisory authority, the CSSF.

 Who is the RAIF for?

Investments in a RAIF are reservced for “well-informed investors”, which are defined as: institutional investors, professional investors, or any other investor who has confirmed in writing that they are a “well-informed investor” and who either (i) invest a minimum of EUR 125,000 or (ii) have obtained an appraisal from a credit institution, an investment enterprise or a management company, certifying the investor’s expertise, experience and knowledge in adequately appraising an investment in the RAIF.

RAIF key features

In summary, the new can be either open-ended or closed-ended and invest in an unlimited variety of assets and pursue numerous of investment policies including transferable securities, financial instruments, private equity, real estate, commodities, funds of funds, etc.

The RAIF Law provides for the whole range of legal forms available for Luxembourg regulated RAIFs. A RAIF may be established under either a contractual ‘common fund’ form (FCP), a corporate legal form like a public or private limited liability company (S.A. or S.à. r.l.), a corporate partnership limited by shares (SCA) or a partnership form (SCS or SCSp), either with variable or fixed capital (SICAV or SICAF).

One of the key advantages of a RAIF consists in a possibility to distribute shares/units to professional investors in the EU on the basis of a pan-European passport under the AIFMD, a right which is usually unavailable to unregulated alternative investment funds.

Most RAIFs enjoy the same tax treatment as SIFs, paying an annual subscription tax amounting to 0.01% p.a. of its net assets but enjoying complete exemption from corporate income tax or withholding tax on the distribution of returns, whether in the form of dividends or interest income. RAIFs limited to risk capital investments will be subject to the tax regime applicable to SICARs meaning it is not subject to a subscription tax and it pays ordinary income tax, unless a tax exemption applies.

 Magnetica RAIF by FARAD Group

Since the enactment of the Reserved Alternative Investment Fund Law (the RAIF Law) in July 2016, FARAD Group has developed its proprietary RAIF Platform, Magnetica SICAV-RAIF, to provide investment managers with solutions for their AIFMD requirements.

Magnetica SICAV-RAIF is an “open architecture platform”, created to enable third parties to launch their own fully supported and administered Luxembourg RAIFs. Incorporated in October 2017, it is currently launching two sub-funds with EUR 70 million of aggregate assets under management..

The platform is targeting investment professionals looking to launch their own fund under Luxembourg’s streamlined alternative investment funds regime. By dramatically reducing the cost of administration and the time taken to process transactions, it offers prospective managers a fast and highly cost effective ‘turnkey’ solution to kickstart their own fund. FARAD Group’s involvement does not end there, as it then provides an on-going & full hands-on support service including regulatory hosting and oversight, plus full marketing, distribution and investor relations management.

Marco Cipolla, Founding Partner at Selectra, explains the reasons behind the launch: “RAIF has enabled the achievement of a significantly enhanced time-to-market for new fund launches and presented a significant opportunity for managers setting up AIFs who wanted to avoid the double layer of regulation. Hence its immediate success.” He also adds:  “Launching a RAIF platform was the ideal opportunity for FARAD Group to meet the market while completing the range of our bespoke owned platforms which already included SIF, UCITS and Impact Investing. Our RAIF platform will thus offer fund managers the opportunity to focus on their core competencies of asset management and provide them with attractive risk-adjusted returns, enhanced diversification and an overall broader investment universe.”

 Magnetica SICAV-RAIF employs top-tier service providers, thereby allowing managers to use an efficient route for launching an AIF in Europe. SELECTRA thus worked alongside Amicorp with the assistance of GSK Luxembourg for the legal structuring. ING will act as depository to the platform while KPMG will act as auditor of the fund.

To get more information on Magnetica, please contact Marco Cipolla, m.cipolla@farad-group.com