The private equity (PE) industry in the United States (US) is thriving, and many firms are looking to expand their operations overseas. The private equity industry in New York is one of the largest and most influential in the world. With a rich history of investment dating back to the 1960s, the city is home to numerous major private equity firms and investment funds. New York‘s private equity industry is known for its competitive and innovative approach to investing, with a focus on identifying and acquiring undervalued assets and driving growth through operational improvements. Private equity firms in New York invest in a wide range of industries, including technology, healthcare, energy, and consumer goods, and their investments often involve significant capital commitments, leveraged buyouts, and other forms of financing. Today, the New York private equity firms seek to attract European investors.
One popular destination for these firms is Europe, and in particular, Luxembourg. This small country has become a hub for investment funds due to its favorable regulations and tax system, making it an attractive option for US PE firms looking to invest in Europe.
Types of Luxembourg Regulated Investment Funds
UCITS
UCITS (Undertakings for Collective Investment in Transferable Securities) is a type of regulated investment fund that allows for the marketing of securities across the European Union (EU). These funds are subject to strict investment rules and must be authorized by the Luxembourg regulator, the Commission de Surveillance du Secteur Financier (CSSF).
Part II of the Law of 17 December 2010
The Part II Fund of the Law of 17 December 2010 governs the management of investment funds in Luxembourg and provides for the establishment of funds that are designed for professional investors. These funds must adhere to specific investment restrictions and diversification requirements, and are subject to supervision by the Commission de Surveillance du Secteur Financier (CSSF), the Luxembourg regulator. The Part II Fund is a popular option for private equity firms looking to launch their investment fund in Luxembourg due to its favorable regulations and tax system.
SIFs and SICARs
SIFs (Specialized Investment Funds) and SICARs (Société d’Investissement en Capital à Risque) are two additional types of regulated investment funds that are available in Luxembourg. SIFs are flexible investment vehicles that can invest in a wide range of assets, while SICARs are designed specifically for venture capital and private equity investments.
Types of Luxembourg Unregulated Investment Funds
RAIFs
RAIFs (Reserved Alternative Investment Funds) are a type of unregulated investment fund in Luxembourg. Unlike regulated funds, RAIFs are not subject to authorization or supervision by the CSSF, but they must be managed by an authorized Alternative Investment Fund Manager (AIFM). RAIFs offer more flexibility in terms of investment strategy and can be set up more quickly than regulated funds.
SLPs and SOPARFIs
SLPs (Special limited partnership) and SOPARFIs (Société de participations financières) are two other types of unregulated investment funds that are available in Luxembourg. SLPs are similar to SICARs in that they are designed for venture capital and private equity investments, while SOPARFIs are used for holding and managing investments.
Securitization
Securitization vehicles are a type of investment fund that specializes in securitizing assets, such as mortgages or auto loans, and issuing securities backed by these assets. These vehicles are commonly used for structured finance transactions and offer tax advantages for investors.
Setting Up an Investment Fund in Luxembourg
The first step to setting up an investment fund in Luxembourg is to choose the type of fund that best fits the investment strategy. This decision will be based on a number of factors, including the type of assets to be invested in, the target market, and the investment restrictions and diversification requirements.
Once the type of fund has been selected, the next step is to form a fund management company that will be responsible for managing the fund. This company must be registered in Luxembourg and must appoint a Luxembourg-based depositary to oversee the fund’s assets.
The fund management company must then draft a prospectus, which is a document that outlines the fund’s investment objectives, strategies, and risks. The prospectus must be approved by the CSSF before the fund can be marketed to investors.
Damalion experts help New York private equity firms to launch their investment fund in Luxembourg. Contact us now.
