Luxembourg is a premier jurisdiction among Europe, Middle East, and Africa (EMEA) institutional investors. Before setting up an alternative investment vehicle in Luxembourg, it is imperative to take a closer look at the processes this initiative will entail.
The Appeal of Luxembourg on the Global Investment fund Space
The Grand Duchy started building its solid reputation as a premier investment fund domicile in the early 1900s. The country formed an efficient industry around undertakings for collective investment in transferrable securities (UCITS) that includes bonds and shares.
Through the years, additional regulations were developed, and amendments were implemented to make investment vehicles in Luxembourg more attractive to private equity and capital investment managers. Alternative investment structures such as SICAR (Investment Company in Risk Capital), SIF (Special Investment Fund), and most recently, RAIF (Reserved Alternative Investment Fund) are now being viewed as some of the most appealing structures among international and fund managers alike.
The impressive flexibility of alternative investment vehicles in various legal forms is inarguably attractive. The same can be said about the Grand Duchy’s tax efficiency and solid legal and regulatory frameworks that promote the easy set-up, management, and administration of funds.
To date, Luxembourg is condiers a major financial hub for private equity and real estate investments as it leverages cross-border marketing across EU member nations and beyond.
There are, of course, other well-known jurisdictions in the alternative investment funds space, such as the United Kingdom, Guernsey, and Jersey. However, the strategic location of Luxembourg being in the heart of Europe and its role as one of the founding members of the European Union makes it a better domicile from an experienced investor’s point of view.
Additionally, the flexibility and Anglo-Saxon approach of limited partnerships continually attracts more investment fund managers from other parts of Europe and the United States.
How Do you Choose the Right Luxembourg Fund?
An investment fund manager with a clear vision of their desired private equity real estate (PERE) investment program will have an easier time choosing the right type of investment structure and legal form in Luxembourg. The goal is to select an investment vehicle that will attract more investors for specific investment strategies that they want to have.
Major factors that influence the type of Luxembourg fund to register and establish are as follows:
- The size and scope of the fund
- Nationality and tax residency of investors
- Complexity and nature of the investment strategy
Popular legal forms that investment fund managers consider include SICAV (Investment Company with Variable Capital) and FCP (Common Investment Fund). By rule, all Luxembourg investment funds may be incorporated as a single or umbrella fund wherein international investors may hold assets in one or more compartments.
Luxembourg perpetuates a highly organized financial ecosystem that supports investment managers, depositaries, administrators, and other key company personnel. There are also Luxembourg-based professionals and service provides that can assist in various essential fund activities, as well as investment managers that can facilitate the strategic structuring and administration of investment funds on behalf of international investors and fund managers.
Essential Pointers when Setting Up an Investment Fund in Luxembourg
When incorporating an alternative investment fund in Luxembourg, fund managers are required to choose a Luxembourg-based administrator. Here are tips that will help you select an expert administration that fits your needs.
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Performs with Due Diligence to Meet Local Administration and Management Needs
The Luxembourg investment fund landscape is highly regulated. To succeed, you need to partner that is highly knowledgeable and familiar with existing laws and requirements. When setting up an investment vehicle, the last thing you want to do is commit mistakes. Choose an administrator with extensive experience interacting with different types of fund investors. It is therefore crucial for fund managers to check an administrators professional track record and the quality of their processes, staff, and systems.
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Establish Easy, Secure, and Rapid Access to Pertinent Information
Fund managers and investors need efficient and quick access to funds-related documents, as well as data related to their funds’ underlying entities. An experienced Luxembourg funds administrator offer optimal solutions and processes to ensure confidence among fund managers and investors alike.
An investment fund administrator should have the resources and tools to handle various tasks, including accounting, management, registration, and secretarial activities. Lastly, an administrator is responsible for providing depositary services in adherence to the Alternative Investment Fund Manager Directive (AIFMD). Choose a service provider that has an expansive network of professionals and wide scope of services in various jurisdictions.
As an expert business consulting firm, Damalion takes pride in its expansive network of connections and long-standing relationships with professionals and service providers to assist fund managers and international investors successfully set-up investment funds in Luxembourg. Contact a Damalion expert today and discover how we can provide comprehensive solutions for you.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
