Over the last 30 years, Luxembourg has built up an unequalled expertise in the set-up, administration and distribution of UCITS and alternative investment funds. Luxembourg is the largest fund domicile in Europe and a worldwide leader in cross-border distribution of funds. Luxembourg-domiciled investment funds are distributed in seventy countries and are recognised not only in Europe, but also in Asia, Latin America and the Middle East.
Why Luxembourg as a fund jurisdiction?
- A long established outstanding international financial services reputation.
- An unrivalled range of investment fund solutions.
- A strong regulatory environment including accessibility, knowledge and responsiveness of the regulator.
- An ability to provide tax neutral efficiency solutions for all types of investment fund products.
- Political, economic, social, legal and tax stability.
- Access to a multicultural, multilingual international workforce.
- An integrated of service providers with deep expertise and ability to meet specific local and international markets.
- At heart of Europe with easy access to other key international financial centers.
Investment policy of UCIs
(Undertaking of Collective Investments)
|Breakdown by investment policy||Net assets (in bn €)||Number of fund units|
|Fixed-Income Transferable Securities||1,455.20||3,200|
|Variable-Yield Transferable Securities||1,958.862||4,069|
|Mixed Transferable Securities||1,071.10||3,538|
|Funds of Funds||328.296||2,114|
|Money Market Instruments and Other Short-Term Securities||404.486||209|
|Futures and/or Options||14.16||84|
|Venture Capital (SICAR)||10.688||72|
|Private Equity (SICAR)||49.161||276|
Top 10 Domiciles of Worldwide
Investment Fund Assets
Luxembourg caters for all type of funds including broadly traditional and alternative Investment Funds. Traditional investment funds maybe set up under any of Luxembourg’s investment fund regimes (i.e. as UCITS, 2010 Law Part II UCIs, SIFs or RAIFs) using any basic structure and include
the following asset classes namely Equity, Bond, Money Market, Multi-Asset and fund of
Alternative investment funds include Hedge, Real Estate, Private Equity, Debt, Infrastructure, Thematic, Funds of AIF and European long-term investment funds. The main fund structures
available include the following:
Investment company with variable capital, (société d’investissement à capital variable – SICAV)
A SICAV is a type of investment fund organised as an investment company that has a variable share capital. The value of its share capital must match at all time the value of its net assets. Increases and decreases of the capital can be made with no mandatory formalities. The SICAV may be organized as a public limited company.
The registered office for any type of investment fund must be located in Luxembourg. Any important documents are to be kept at the registered office and the issuance and redemption of share will also take place in that location.
Main advantages of SICAV in Luxembourg:
- Access to institutional quality products - A SICAV structure provides an accessible route to world - class investment products. Even those buying a small part of a portfolio gain access to a wide variety of instruments and markets – that often would not be available to them otherwise.
- Diversification - The EU directives governing the SICAV structure build in certain levels of diversification. By investing in this type of fund allows to diversify investments across different vehicles – reducing a risk.
- Daily liquidity - The SICAV structure allows investors to buy and sell easily – it can offer daily liquidity
- Asset protection and autonomy for asset managers - in a SICAV structure investor risk is minimised, not just through diversification of the portfolio but because the assets of individual sub-funds are legally separate.
- Tax advantage - SICAVs are exempt from the income tax. Furthermore, this type of Luxembourg fund can also benefit from a tax exemption on the net wealth tax and the withholding tax on the distribution of dividends paid to non-resident investors.
Investment company with fixed capital, (société d’investissement à capital fixe – SICAF)
A SICAF can be formed as a public limited company, a limited liability company, partnership limited by shares or co-operative. The share capital of an investment company with fixed capital may only be increased or decreased by way of a decision of the general meeting of shareholders
to be held before a notary, and subject to applicable publication requirements. However, the capital may
be increased by the SICAF’s managing body directly, without requiring an extraordinary general meeting of shareholders to decide upon the increase via the authorised share capital mechanism.
It has a separate legal personality than the one of the shareholders, and in order to increase or decrease its capital, formal decisions have to be taken, in accordance with the fund’s incorporation documents. Its management can be established under a board of directors or board of managers, depending on the legal entity that was selected for the registration of the SICAF.
The main advantages of a SICAF in Luxembourg are:
- Diversification - the fund is set up in order to invest in securities and in other liquid financial investments
- Type of fund - the SICAF can be registered to operate as a security fund, real estate fund or holding fund
- Tax advantage - is exempt from the income tax, the net wealth tax or the value added tax
- Fixed share capital - the SICAF represents a corporate structure which has a fixed share capital
- Different legal forms - the SICAF in Luxembourg may be set up as the limited liability company, the partnership limited by shares or the cooperative registered as a public limited company
Luxembourg Specialised Investment Fund (SIF)
A Specialised Investment Fund (SIF) is an investment
fund that can invest in all types of assets. This type of fund was created in Luxembourg by the Law of 13 February 2007 on specialised investment funds (as amended).
Unlike traditional UCIs, SIF units are reserved for
qualified investors, i.e., institutional and professional investors or private clients who have extensive knowledge of how investment funds work. It usually qualifies as alternative investment fund (AIF) and can be sold to well-informed investors.
SIFs that have appointed an EU AIFM can market their shares, units or partnership interests via a specific passport to well-informed investors across the EU. SIFs are regulated and tax efficient multipurpose alternative investment fund vehicles dedicated to all types of investments.
Main advantages of SIF in Luxembourg:
- Diversification – SIFs can invest in all type of assets
- Tax advantage - SIFs also enjoy lighter regulations than traditional UCIs (UCITS) and fiscal advantages, as they are not subject to levies or withholding tax on dividends paid.
- Flexibility - A SIF provides a great deal of flexibility in the form of organisation, investment policy and the types of underlying assets in which it can invest
- Set up cost - SIFs benefit from having a relatively prompt set-up process and low costs
- Different legal forms - A SIF may be structured in various legal forms (FCP, SICAV, SICAF, etc.)
Luxemburg Reserved Alternative Investment Fund (RAIF)
The RAIF structure was introduced in 2016 and combines features of the most popular fund structures in Luxembourg, namely SIF and SICAR. RAIFs are limited to well-informed and professional investors and offer diversification and multiple strategy activation through its “umbrella” structure with multiple compartments. This specific structure enjoys low subscription tax of 0.01% of the NAV. RAIFs can be incorporated and launched with a simplified process (usually 4-6 weeks), since it is not supervised by the CSSF.
RAIFs are subject to the provisions of the AIFMD and supervised by an authorized EU Alternative Investment Fund Manager (AIFM) and enjoys the benefits of marketing across the EU using the European Passport legislation.
A RAIF can be open or closed-ended and may be set up as a stand-alone fund or as an umbrella structure consisting of multiple sub-funds or compartments.
Main advantages of RAIF in Luxembourg:
- No supervision by CSSF - RAIF does not require supervision
by the Luxembourgian CSSF (Commission de Surveillance du Secteur Financier). RAIF indeed is regulated by AIFMD and supervised by an authorized Alternative Investment Fund Manager (AIFM)
- Easy to set up - RAIF does not require the approval of CSSF for being launched. Structuring and the launch of the fund are controlled by "ManCo", a private company managing the fund for all its duration
- EU - passport - RAIF benefits from the European Passport, allowing all businesses invested in the fund to be marketed in all EU-countrie
- Diversification - RAIF allows for diversification, consisting in an "umbrella" fund with multiple compartments, each with a specific investment policy, cost structure and distribution policy
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