For years, Luxembourg has been solidified as the number one European center for investment funds, with an outstanding international financial services reputation.
Luxembourg offers a stable economic and political situation. It also has an unrivaled range of investment fund solutions.
Luxembourg-domiciled investment funds are administered in seventy countries and are recognized all over the world.
Located at the heart of Europe, and recognized as a leader in the banking and investment funds industry, Luxembourg has also established itself as a private equity and venture capital center with winning features.
Luxembourg venture capital market status
Private equity and venture capital have increased in significance within the Luxembourg finance and fund industry over the years and have become more attractive for professional and institutional investors. And since, Luxembourg has maintained more than ever its responsibility to the private equity and venture capital industry, modernizing and offering new structures that are aligned with the requirement of sponsors.
Luxembourg provides a wide range of fund and company structurings to the private equity and venture capital industry.
Here is a summary of the popular Luxembourg vehicles modified for venture capital:
- Luxembourg Specialised Investment Fund (SIF)
A SIF is a Luxembourg investment fund that can invest in all types of assets. The SIF is the standard structure, authorized and supervised by the CSSF (Commission de Surveillance du Secteur Financier) for private equity investments under the consideration of diversification rules. SIF regimes are reserved for qualified investors.
SIFs enjoy lighter regulations than formal UCIs, as they are not subject to levies or withholding tax on revenues paid. SIFs also benefit from a relatively quick set-up process.
- The Luxembourg investment company in risk capital (SICAR)
The SICAR is the fund type intended to serve private equity investments as it imposes an investment in risk capital. The corporate purpose of a SICAR is the collection of funds from well-informed investors who are familiar with the risks and the improvement of the acquired target company. The SICAR regime provides a lot of corporate flexibility along with favorable tax treatment.
- Luxemburg Reserved Alternative Investment Fund (RAIF)
The Reserved Alternative Investment Fund (RAIF) structure combines the features of the SIF and SICAR but is not authorized or supervised by the CSSF. RAIFs enables a simplified process and a shorter time to market but, it needs to assign a fully authorized AIFM for its supervision. RAIFs are restricted to well-informed and professional investors and offer diversification through its umbrella structure with multiple compartments. A RAIF requires no supervision by CSSF and is easy to set up.
- Luxembourg unregulated partnerships
Private equity and venture capital investors and managers also have a preference for unregulated partnerships – the limited partnership (SCS) and the specialized limited partnership (SCSp). These companies are also tax transparent and can be beneficial for tax-exempted investors.
- The Luxembourg European Venture Capital Fund (EuVECA)
The main purpose of the EuVECA, which is a companion to the Alternative Investment Fund Managers Directive (AIFMD), is to make venture capital funds easily established in the European Union. The EuVECA also authorizes a sub-threshold AIFM to market a venture capital fund on a passported basis throughout the EEA (European Economic Area). EuVECA may represent a considerable opportunity if you are or ponder being based in Luxembourg.
Also, Luxembourg is engaged in the development of various incubators as well as organizing conferences.
Luxembourg’s private equity and venture capital industry are expected to grow continuously in the coming years and to modify to the upcoming regulatory and investor demands.
Your Damalion expert is ready to assist you in all aspects of your business: from fund structuring to company formation and bank account open accounting in any jurisdiction. Let’s go ahead and contact your Damalion expert now.
