Alternative investment fund managers increasingly prioritise launching new sub-funds or compartments under established Reserved Alternative Investment Funds, known as Raifs, instead of launching new primary structures, a data analysis by Investment Officer shows.
Luxembourg Raifs in recent years have gained popularity as private investment vehicles among institutional and professional investors worldwide, enabling them to allocate investments to for example private debt, real estate and infrastructure projects or as funds for multi-family office investments. Some notable users of Luxembourg Raifs are the Queensland Investment Corporation in Australia, Singapore’s Silkroad and Amsterdam-based Anthos, as well as JP Morgan and KKR.
The analysis shows that fewer new Raifs were launched last year, but at the same time makes clear that more than 200 new sub-funds were created. Luxembourg is home to approximately 250 Alternative Investment Fund Managers, known as AIFMs. When it comes to Raif funds, only the AIFM, and not the fund itself, is subject to direct supervision by supervisor CSSF. This convenience explains part of the popularity of Raifs. Since Luxembourg introduced a law enabling Raifs in July 2016, more than 2,500 such funds have been created in Luxembourg.
Swiss are top issuers of Luxembourg Raifs
Switzerland-based Pictet Group was the top issuer of Raif vehicles last year in Luxembourg. Its local subsidiaries collectively established 52 new funds as Raifs or compartments/sub-funds under existing Raifs, according to the Investment Officer’s analysis of CSSF alternative investment fund data.
Carne Group, headquartered in Ireland, came in a close second, registering 48 such funds during 2023. With 26 new Raif funds or sub-funds, another Swiss-based group, Partners, was the third most active issuer.
The following are the top 10 Raif vehicle (of all types) issuers for 2023, as per the CSSF’s AIF identifiers dataset:
AIFM: |
Raifs & sub-funds launched in 2023: |
1. Pictet Group |
52 |
2. Carne Group |
48 |
3. Partners Group |
26 |
4. Alter Domus |
24 |
5. Avega Capital |
21 |
6. Sanne LIS/Apex Group |
20 |
7. Waystone |
18 |
8. Mercer Alternatives |
16 |
9. Universal-Investment |
15 |
10. ONE Fund Management |
14 |
Another source for Raif data comes from the Luxembourg Business Register, which updates a list of newly registered Raifs twice per month. A less-rich resource, it only counts new primary Raif structures, not sub-funds. Because sub-funds under existing Raifs not included, counts based on the LBR are lower. For example, the LBR number for new, primary Raif funds in 2023 is 362, compared to about 480 that were recorded during 2022.
The CSSF dataset on investment funds is updated almost daily. It shows that 590 new Raif vehicles were labelled as such during 2023, either as new funds or as sub-funds. Given that 362 new primary Raifs were created. according to the LBR data, this suggests that approximately 228 sub-funds were introduced last year.
Financial details about the new Raif funds, such as assets under management or fund raising targets, are not included in two Luxembourg datasets. An earlier study of a selection of annual reports issued by Raifs suggests that a typical fund holds about 150 to 200 million euro in assets, ranging from relatively limited assets for Raifs still raising funds to multiple billion euros in assets for Raifs that already have been well established.
The graph above is based on LBR data and only includes new primary Raif structures.
For Dublin-headquartered Waystone, which topped the 2022 Luxembourg ranking with 39 new primary Raif registrations, the slowdown in Raif launches reflected a change in approach in how their clients used the Raif vehicle.
“Waystone has led the way on Raif launches for several years and many of our clients already have their Raif umbrellas in place,” said Denis Harty, the firm’s continental Europe country head. “These clients are simply launching new sub-funds rather than registering entirely new Raifs.”
Luxembourg home to 2,518 Raifs
With 362 new Raifs registered in 2023, this brings the total since the Raif vehicle was created in 2016 to 2.518 main Raif structures. The 2023 number reflects a 24 percent drop against 2022 when 478 new Raifs were created. The 2022 result was an 8 per cent increase over 2021.
The analysis of the LBR dataset identified private markets firm Partners Group as leading in new Raif registrations. A London-based spokesman for the Swiss firm said the firm did not wish to comment on its activities with Luxembourg Raifs.
As an independent investment firm, Partners Group runs an in-house operation fundamentally different from that of the many third-party AIFMs active in Luxembourg. Partners registered 24 new, primary Raifs in 2023. This is nearly double the count for the nearest competitors, AIFMs ONE Fund Management, Waystone, Carne, all three of whom tied for third place, registering 13 such Raifs, as per the LBR count.
According to Steve Bernat, the founding partner of the ONE Group, in-house ManCos like Partners Group only manage their own funds. In contrast, third-party AIFMs manage and provide substance to funds from other asset managers.
Bernat took issue with the accuracy of the LBR statistics that Investment Officer Luxembourg analysed. He explained that as he saw it, there were two “missing on the register”, and that there were three main Raifs transferred from another AIFM onto the ONE platform. “So for us, there are 18 new Raifs,” whereas LBR only credited his firm as of early January with 13.
No preference
Waystone’s Harty explained that “nothing has changed for Waystone when it comes to how we approach launching new funds on behalf of our clients.” Taking an open architecture approach, he explained “we do not have a preference for one regime over another.”
The firm increased its total assets under management by 47% in 2023, he said. “For us, it is more about that number than the number of Raifs or other structures.”
In an interview, One Group’s Bernat discussed the relative role of a Raif compared with other tools in the “Luxembourg toolbox”. He pointed to the “industry trend” of all the unregulated funds, “which is the SCSp”. An SCSp is a special partnership with limited disclosure requirements that is often used in Luxembourg to construct alternative investment funds offered to institutional and professional investors.
Umbrella strategy
Bernat suggested that some of the reduction in new Raif registrations is because “many managers don’t consider the umbrella opportunity.” He contrasted a manager with a fund established with someone with a long-term strategy involving a Raif umbrella. “Maybe it’s going to make it easier to launch just another compartment or sub-fund next year.” This appears to be the key trend in current Raif developments.
Over at Hauck & Aufhäuser Lampe Privatbank AG, which tied with three other firms at 6th place, with six new full Raif launches, Marc Kriegsmann, head of business development asset servicing described 2023 as “a rather quiet Raif market,” especially for real-estate-linked strategies.
“Many market participants postponed their Raif launch to mid-/end-2024 due to a lack of interest from institutional investors and investment opportunities,” he said. While larger institutional entities are still launching their funds, “small and mid-size managers seem to be waiting for the sky to clear up a bit more.”
Positive trend
Kriegsmann said he is optimistic about the mid-term future. “We as Hauck Aufhäuser Lampe see a positive trend for the upcoming 12 months.”
Kavitha Ramachandran, regional head of CRM - Northern Europe at Apex Group, whose subsidiary MJ Hudson Management S.A. tied with three other firms at sixth place with six new Raifs, was effusive. “Raifs continue to lead in terms of top choices to access private markets and assets.”
This chart shows the monthly variation in new Raif registrations in the LBR data on new full Raif launches.
Ramachandran described private debt, renewables, and infrastructure as being popular asset classes for long-term investments in the current economic climate. Apex subsidiary Sanne LIS SA tied with 12 other firms with five new Raifs.