Open different types of investment funds in LuxembourgUpdated on Tuesday 04th April 2017
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Luxembourg is the leading investment fund centre in Europe. The city has been developing its regulatory framework, laws and market strategies to provide the best climate for investments and market expansion. Many foreign investors who want to open a collective investment fund or an alternative investment fund choose Luxembourg because of its leading position in Europe. At an international level, Luxembourg is the second market for the incorporation of a fund, after the United States of America.
The Grand Duchy of Luxembourg is a small European country compared to its larger and influential neighbours: France, Germany and Belgium. It has a high concentration of expats, foreign employees and foreign investors. The multinational climate is also aided by the three national languages to which English is added as a commonly used language in the business sector.
Luxembourg is an important financial centre with a highly developed regime for investment funds. These undertakings for collective investments are authorized and supervised by the Commission for the Supervision of the Financial Sector (CSSF).
It is also important to know that the financial sector is the most representative for the Luxembourg’s Gross Domestic Product (GDP), as it contributes at the local economy with a quarter of the total GDP.
Investors interested in investing in Luxembourg can receive assistance on this matter from our team of financial experts.
Types of investment funds in Luxembourg
We invite businessmen to read a few interesting and useful details about the types of investment funds that can be opened in Luxembourg:
Luxembourg has an impressive number of funds and sub-funds. The undertakings for collective investments (UCI) can be included in two separate categories:
- UCITS: undertakings for collective investment in transferable securities;
- alternative investment funds (AIFs): hedge funds, real estate investment fund, private equity funds, etc.
Foreign investors in Luxembourg can set up their financial instruments in the form of three legal structures with various characteristics:
- the common investment fund (FCP), with no legal personality;
- the investment company with variable capital (SICAV), where investors control the capital;
- the investment company with fixed capital (SICAF).
These three types of funds can also be managed by the investor, if he chooses to do so. If not, he may appoint a fund management company that will take over the necessary requirements for the management of the fund and tax compliance in Luxembourg. Funds can be managed on a stand-alone basis or they can form the so-called umbrella fund (a multiple compartment fund).
Two other types of funds, the specialized investment funds (SIF) and the investment company in risk capital (SICAR) are also available, although they are generally set up by highly experienced investors.
The presentation provides more details referring to the investment funds available in Luxembourg:
Professional assistance for setting up a Luxembourg investment fund
Our experts in Luxembourg can help entrepreneurs set up an investment company or a common fund. The SICAV and the SICAF are often chosen by investors who can control the amount of capital they invest, but these legal structures need to be first set up as legal entities in Luxembourg (public limited company or other forms).
Common investment funds (FCPs) will need to be managed by a Luxembourg management company. While not mandatory, SICAFs and SICAVs can also be managed in this way. Our specialists can help out with any management issues.
The choice between different investment vehicles in Luxembourg is usually based on the taxes they must pay, the operational and managerial issues the fund will create and even marketing considerations for some of the investors.
Risk management is an important process for any UCITS in Luxembourg. It can be provided by a number of professionals with qualifications in the financial industry. The board of the managing company of the fund will oversee the risk management process. In terms of risk management, the law distinguishes between sophisticated UCITS and non-sophisticated UCITS.
Recently, the local authorities have approved the legislation referring to a new investment tool, designated to facilitate the access on the investment market of professional investors. The reserved alternative investment fund (RAIF) was first deposited at the local parliament on 14th of December 2015.
The legislation stipulates that the RAIF is an alternative investment fund which should start its activity without a prior approval from the Financial Sector Supervisory Commission. The fund should also have access at the marketing passport, but it is necessary to know that the RAIF can only be incorporated by professional investors.
A RAIF can be set up as a fixed capital - SICAF, or variable capital – SICAV.
Services offered by our experts in Luxembourg
Although the management of the investment fund can be delegated to a specialized investment company, the investor must know the specific laws and regulations concerning the set-up and functioning of an investment vehicle.
Our consultants in Luxembourg can provide assistance for fund administration and fund management as well as legal compliance for any chosen investment vehicle. Luxembourg maintains its position as a financial centre by constantly updating and changing its regulatory framework. As a centre for a large variety of investment funds, the country is also adopting new policies to regulate the market and protect the investor’s best interests.
Our experts in Luxembourg can offer their services in order to open an investment fund in Luxembourg or start any other type of company. Our consultants have extensive knowledge not only of the financial regulations, but also of other aspects of civil, commercial and company law in Luxembourg.
For detailed information on how to start a hedge fund anywhere in the world, we invite you to visit FundWorld, a financial online publication on investment funds.