Luxembourg is rapidly becoming a hub for shariah compliant investment funds, with promoters keen to harness the country’s strengths and expertise in cross-border fund distribution.
Luxembourg offers a variety of fund structures for shariah compliant investment vehicles.
Over the last 20 years, Luxembourg has built its position as the most popular domicile for undertakings for collective investments in transferable securities (UCITS). Originally created as a retail product, UCITS funds are widely sold both to the public and to corporate and institutional investors. Benefiting from a European distribution passport, UCITS funds may be marketed across the European Union and in many other countries around the world including countries in Asia, Latin America and the Middle East. For instance, more than 700 Luxembourg funds are registered in Bahrain. 75% of all “cross border” funds are domiciled in Luxembourg. This expertise makes Luxembourg the ideal location for shariah compliant funds created to be sold to retail or institutional investors around the world.
Investors seeking a more flexible regime have several other vehicles at their disposal. Part II of the legislation on undertakings for collective investment is a regime that has been widely used for alternative investments but does not benefit from the European passport. Two other structures, the specialised investment fund (SIF) and the investment company in risk capital (SICAR) allow a wide variety of investments and can be used to set up shariah compliant vehicles for institutional and well informed investors.