Luxembourg is the most reputable domicile for investment funds in Europe and the second most preferred location for investment funds globally after the US. The collective investments industry counts 15,000 funds with assets under management reaching 4.6 trillion dollars. The Luxembourg financial authority, the Commission de Surveillance du Secteur Financier (“CSSF”) is one of the major regulators in Europe and recognised internationally for a pioneering and flexible regulatory framework. In addition, Luxembourg offers a favourable tax regime, especially for non-residents.
There are two types of funds in Luxembourg: regulated funds (i.e. authorised and supervised by CSSF) and unregulated funds. Undertakings for collective investments (“UCIs”) can be registered under two main categories: undertakings for collective investments in transferable securities (“UCITS”), which are retail funds and alternative investment funds (“AIFs”), which are funds for well-informed investors and all investment types. Once approved in one EU Member State, an AIF or a UCITS can be distributed in all other EU Member States using the EU passport.
- The following types of investments funds can be set up in Luxembourg:
Societe d’ Investissement a Capital Variable (“SICAV”) is an open investment plan, organized as a company limited by shares, with a principal objective of investing in financial assets
- Societe d’investissement a Capital Fixe (“SICAF”) is a type of closed investment scheme that also operates as a company limited by shares but it is mostly used for investments in private placements
- Société d’Investissement en Capital à Risqué (“SICAR”) is established with the objective of facilitating the raising of funds and investing in risk-bearing capital. It can be established in any form of legal entity
- Specialized Investment Fund (“SIF”) is a type of fund based on a share capital which amounts to at least 1,250,000 EUR payable within 12 months and may be established as a company or a partnership. These funds are extremely advantageous as are exempt from capital tax, income tax on qualifying income and dividend withholding tax
- Société de Gestion de Patrimoine Familial (“SPF”) is specially designed for private wealth management and unlike the rest of the funds, it allows individuals to manage their financial assets. It can be set up in any other form of legal entity and cannot have a social object covering business activities. It is exempt from paying income tax, net wealth tax, and municipal business tax
- Reserved Alternative Investment Fund (“RAIF”) does not require CSSF approval, however must appoint a fully license AIFM
- Fonds Commun de Placement (“FCP”), which is comparable to a unit trust
- Limited Partnerships (“LPs”) and Special Limited Partnerships (“SLPs”)
Funds such as AIF, RAIF and UCITS can be listed on the Luxembourg Stock Exchange and other recognized EU stock exchanges
LINDEMANNLAW can help you set up in Luxembourg UCIs, including UCITS and AIFs; SICAVs, SICAFs, SIFs, SPFs, RAIFs, FCPs, open and closed-ended retail funds, hedge funds, société anonyme (“S.A.”), société par actions simplifiée (“SAS”), société à responsabilité limitée (“S.à r.l.”), société en commandite par actions (“SCA”), société en nom collectif (“SNC”), Société en commandite simple (“SCS”), société en commandite spéciale (“SCSp”), Alternative Investment Fund Manager (“AIFM”), SICAVs, SICAFs, SICARs, SIFs, SPFs, RAIFs, FCPs., LPs and SLPs.
Luxembourg is also a leading market and domicile for holdings and the securitisation market. The Luxembourg securitisation law offers an attractive regulatory framework for setting up holding companies and securitisation structures in Luxembourg at reasonable cost. The key features which make the securitisation law attractive are its flexibility in entity establishment from a cost and structural point of view, legal certainty, broad bankruptcy remoteness mechanisms, qualified service providers in Luxembourg, tax neutrality.
Securitisation is, in its very basic terms, the process of taking a illiquid assets (e.g. private debt, real estate, CAT risks) through financial engineering transforming them into a bankable security with an ISIN which may be easily sold to and subscribed by investors on financial markets. The process is particularly attractive to regulated or non-regulated institutions or asset managers such as banks, insurers, real estate developers or other alternative investments providers which may be subject to regulatory limits on levels of lending by reference to the outstanding level of loan assets held on their balance sheets.
LINDEMANNLAW can help you set up in Luxembourg holding companies, securitisation vehicles (“SVs”), including in a form of a public limited company (“S.A.”), private limited liability company (“S.a.r.l”), a corporate partnership limited by shares (S.C.A.) or a co-operative company organized as a public limited liability company including drafting of financial instruments and negotiation with financial regulators (e.g. CIMA), paying agent(s) and tokenization (security or asset tokens – STOs).