LUXEMBOURG’S INVESTMENT TOOLBOX
Undertakings for Collective Investment in Transferable Securities (UCITS) have had an established legal framework in Luxembourg for 30 years, with the latest major amendment taking place in 2016 with the transposition of UCITS V into Luxembourg law.
The UCITS brand today represents a flagship EU product that is distributed globally. A growing number of countries in Asia and Latin America have also accepted UCITS based on the stability, quality and regulatory characteristics of UCITS-compliant funds.
Regulated Alternative Investments
Luxembourg has also developed significant expertise in the field of alternative investment funds, including Hedge Funds, Private Equity and Venture Capital, and Real Estate. With the entry into force of the EU’s Alternative Investment Fund Managers Directive (AIFMD) in 2013, there is now space for further cross-border activity in the alternative funds space.
The Luxembourg UCIs sector has grown rapidly and the country is recognised as a premier alternative fund domicile, authorised for retail clients.
Specialised Investment Funds (SIFs) are flexible alternative vehicles for professional or “well informed” private investors. They are subject to supervision by the CSSF. Today there are more than 1,300 SIFs established in Luxembourg.
Investment Companies in Risk Capital (SICARs) can be public or private companies that can raise funds to invest in risk-bearing capital. They benefit from a simplified status under Luxembourg corporate law and a favourable regulatory and tax regime.
There are currently more than 350 SICAR fund units in Luxembourg, representing more than €62 bn in AuM.
Unregulated Investment Structures
Reserved Alternative Investment Funds (RAIFs) were created by the RAIF law of July 2016. RAIFs are an unregulated product and can be set up without prior approval from the CSSF. RAIFs are, however, indirectly supervised via their management company since they must be managed by an AIFM that, in turn, is authorised by the CSSF.
RAIFs offer flexible features, such as complete freedom of investment strategies and a lighter regulatory framework than that imposed on traditional AIFs. Quick time to market is another attractive feature of the RAIF, given that they can be set up by notaries without the regulator’s approval.
There are now over 1,500 RAIFs established in Luxembourg, managed by AIFMs from
The Luxembourg government used the transposition of AIFMD into Luxembourg law in July 2013 as a springboard to rework its limited partnership regime, resulting in the creation of the Common Limited Partnership and Special Limited Partnership fund categories.
The Special Limited Partnership is a partnership without a legal personality, and has been designed to be close to the Anglo-Saxon common law investment partnerships. It has been used extensively in Luxembourg since its creation as a vehicle in the alternative sector, particularly for private equity investments, with currently over 5,600 SCSs /SCSps in existence in the Grand Duchy.