FCP-RAIFs & Management Companies – Does the Omnibus Law Really End All Controversy?
3 Pages Posted: 3 Dec 2019
Date Written: November 1, 2019
Abstract
Recently, the omnibus law of 16 July 2019 (the "Omnibus Law") ended a longstanding controversial discussion as to what type of "management company" may be appointed for a FCP-RAIF. Since the introduction of the RAIF law, the RAIF law required that a FCP-RAIF must be managed by a Luxembourg management company "meeting the conditions referred to under article 125-1 or 125-2 of the UCI law, as amended". In practice, there were two diverging ways of how this requirement was interpreted by market players. The first line of interpretation was that this requirement had to be understood as requiring management companies of FCP-RAIFs to be expressly authorized as a "Chapter 16 ManCo", i.e. management companies authorized pursuant to article 125-1 and 125-2 (or "Chapter 16") of the UCI law. The second, more liberal line of interpretation, taken by market practitioners was that management companies, such as UCITS management companies ("Chapter 15 ManCos") and management companies complying with Chapter 18 of the UCI law ("Chapter 18 ManCos"), that merely complied with the material conditions of article 125-1 or 125-2 of the UCI law sufficed the "management company criterion" laid down in the RAIF law.
The Omnibus Law ends this controversy by allowing Chapter 15, 16 and 18 ManCos (the approach for FCP-SIFs) to be appointed as a management company for FCP-RAIFs. This contribution takes the view that this approach is a step in the right direction. This solution, nevertheless, does not resolve the Luxembourg "piecemeal approach" towards the use of management companies for FCPs in the various Luxembourg product laws nor is it in line with "fund governance" under the AIFMD and UCITSD, and the adoption of FCPs in the legislation of other Member States. It concludes by proposing an alternative more progressive approach.
Keywords: AIFMD, UCITSD, FCP, SIF, SICAR, UCI Law
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