Luxembourg offers a range of structures for undertakings for collective investment (UCI), which are subject to different levels of regulation. The choice of a structure is generally driven by the investment policy and the distribution strategy of the fund.
There are two large categories of UCI:
- undertakings for collective investment in transferable securities (UCITS), which comply with the European Directive on that subject;
- alternative investment funds, which cover all other types of fund including hedge funds, real estate investment funds and venture capital and private equity funds.
Three legal structures are available:
- the common investment fund (Fonds commun de placement - FCP), which has no legal personality and which must be managed by a fund management company;
- the investment company with variable capital (Société d’Investissement à Capital variable - SICAV), where the capital varies in response to subscriptions and redemptions made by investors;
- the investment company with fixed capital (Société d’investissement à capital fixe - SICAF).
The SICAV and the SICAF may be self-managed or they may appoint a fund management company.
All these structures can be set up as a stand alone fund, with a single investment portfolio, or they can be structured as a multiple compartment fund (also known as "umbrella fund") which creates separate sub-funds (compartments) under the roof of a single legal entity. These sub-funds function as independent entities, each with its own investment policy, target distribution market and investor profile.
Each fund or sub-fund can, in turn, issue different classes of shares which vary, for instance, in the type and level of commissions, enabling particular shares or units to be tailored to the needs of a specific market or clientele (institutional or private).
Two structures are reserved for use by well informed investors. These are the specialised investment funds (SIF), which enjoys a high degree of freedom in its investment policy, and the investment company in risk capital (société d’Investissement en capital à risque - SICAR).