Luxembourg is inarguably one of the largest fund center in Europe. The country’s total asset under management have doubled over the past decade, from EUR 2 trillion in 2011 to EUR 5.9 trillion in 2021. 

It’s attractiveness to fund managers and international investors are predisposed by several factors, including its AAA- rated economy, political stability, and comprehensive compliance and regulatory frameworks. 

Why is Luxembourg an Attractive Jurisdiction for Foreign Fund Managers? 

For fund managers in the United States, one of Luxembourg’s main selling factor as an investment domicile is its robust toolbox for alternative investment funds. The Luxembourg alternative investment fund toolbox has been recently updated to appeal to the various needs of private equity groups, regardless of their jurisdiction. 

The extensive suite of fund structuring solutions offer fund managers greater flexibility in marketing and managing their services to prospective investors. Some of the most popular alternative investment structures include limited partnership (SCS), special limited partnership (SCSp), and reserved alternative investment fund (RAIF). 

Why is Luxembourg an Appealing Domicile among Foreign Investors? 

Fund service providers based in Luxembourg offer general partners and shareholders a central hub, which in turn allows them to outsource administration, management, reporting, and accounting services to gain leverage of the third-party alternative investment fund manager directive (AIFM). The AIFM model aims to ease streamline the process and ease the burden for alternative investment fund managers, giving them free time to focus on their fund’s investment strategies. 

For general partners and investors who aim to practice responsible investing, Luxembourg also offers environmental, social and governance (ESG) expertise. To date, it is the sixth most green financial hub in the world. 

Additionally, Luxembourg is home to Luxembourg Green Exchange that is set up to bring environmental, social and governance into the mainstream financial sector through its strategic branding efforts.

Six Reasons why Fund Managers Choose to Open a Fund In Luxembourg?  

Highly-Flexible and Versatile Alternative Investment Fund Toolkit

Luxembourg offers a wide range of fund structuring options for both regulated and unregulated funds. 

Robust Regulatory Framework

A robust regulatory framework means investors and fund managers have greater freedom in choosing the investment structure that fits their specific requirements and goals. 

Fund Service Providers Offer a Central Hub for Investment Operations

By aggregating all services required to build an investment fund, fund managers and investors enjoy a smooth and streamlined process, from incorporation, management, accounting, to fulfilling reporting requirements. 

An Attractive Fintech Ecosystem 

The major names in the fintech industry is headquartered in Luxembourg, including Rakuten, Amazon, and PayPal are headquartered in Luxembourg. 

ESG Credentials

Luxembourg is continuous in its efforts in promoting sustainable and responsible investments, thus attractive more foreign investors over time. 

Biggest Investment Fund Center in Europe

As of 31 December 2021, the total net assets of Luxembourg investment funds under management is EUR 5.5 trillion. 

For fund initiators, private equity groups, and international investors looking to establish a fund in Luxembourg, Damalion offers a comprehensive, single-source solution for all your fund formation needs. Our global service network consists of professionals that can assist you in establishing and further growing your presence in Luxembourg and throughout Europe. We will help you incorporate your preferred fund structure speedily and efficiently, with just one point of contact from start to finish. We have enduring relationships with seasoned Luxembourg lawyers, accountants, tax planning consultants, and other service providers who are well prepared to support you in accomplishing various activities, including bank account opening, bookkeeping, accounting, tax planning, and more. To learn more about the alternative investment fund landscape in Luxembourg and how it can contribute to your success, reach out to a Damalion expert today. 

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.