Being the world’s second-largest fund domicile, after the USA, Luxembourg is the main investment fund center in Europe. It is also the global center for cross-border investments and a gateway for Chinese investment flows.
Luxembourg’s investment fund industry is prominent in cross-border fund distribution, with a specific focus on Asia, Europe, Latin America, and the Middle East.
Fund promoters use Luxembourg as a platform to domicile funds that are then thereafter disseminated to retail, high net worth, and institutional investors.
There are presently over 3,600 investment funds representing over 14,500 fund units in Luxembourg.
Luxembourg: The Hub for Renminbi Funds
The China-Luxembourg ties have always been incredible, with strong confidence and financial bond between the two countries.
Over 40% of multinational funds investing in Chinese capital markets are domiciled in Luxembourg. Also, Chinese asset managers that have chosen to launch a range of European investment funds through their Hong Kong subsidiaries, have chosen Luxembourg as the domicile for those funds.
Which brings the question “Why Chinese investors choose Luxembourg?”
- Luxembourg is a desirable and ideal place for businesses, with the biggest Eurobonds issuing platform in the Eurozone and the largest pool of Renminbi deposits and funds.
- Luxembourg has a history of political and social vitality, in addition to a productive financial ecosystem, and beneficial legal and regulatory frameworks.
- Luxembourg’s active ecosystem of service providers and professionals offers valuable support to Chinese entities in their local and cross-border business growth.
- Luxembourg’s strong financial ecosystem, multi-lingual workforce, dominating role in green bonds, and thriving Renminbi business make it a desirable country for Chinese business.
Various funds have an investment policy that is concentrated on international emerging markets, the Asian region specifically. This is why Renminbi-denominated assets have grown in the portfolios of many Luxembourg-based funds.
Chinese investors may choose among the myriad of Luxembourg investment structures
The most popular legal entities used for Chinese investment in Luxembourg are private limited liability companies (SARL) and public limited liability companies (SA).
And regarding investment activities by funds created by Chinese investors in Luxembourg, the most popular structure are the reserved alternative investment fund (RAIF), and the specialized investment fund (SIF).
Additionally, an investment company in risk capital (société d’investissement en capital à risqué or – SICAR) is also generally used by Chinese investors to pool money for investment.
The key requirement for establishing and utilizing any of these vehicles is the installation of a specific entity in Luxembourg with adequate substance.
Luxembourg, the best ally to Chinese investments in Europe
Luxembourg has been successful in inviting asset managers to domicile their China-focused investment funds in the country. Eliminating Chinese domestic funds, Luxembourg represents the biggest domicile for investment funds investing in Chinese capital markets in terms of assets under management, attracting over 45% of assets globally, and over 80% of assets in a European context.
Luxembourg is an ideal center within the European Union for financial services activity related to the Chinese market, and it is well positioned to act as a bridge into the Renminbi investment pool.
The openness of the country, warmth towards foreigners, and also straightforward business traveling under the Schengen Treaty have made the outlook for Chinese investment in Luxembourg remains optimistic.
If you want to register your Company or your investment fund into Luxembourg, contact our Luxembourg-China desk now.
