In recent years, Chinese private equity (PE) funds have been seeking out new investment opportunities abroad, particularly in Europe. One country that has seen a surge of interest from these funds is Luxembourg. Luxembourg has become a hub for Chinese Private equity investment, highlighting its key advantages and the different investment vehicles available to Chinese funds.
Why Luxembourg for Chinese PE Funds?
Luxembourg is a small country located in the heart of Europe, providing easy access to a large and diverse market. It is also home to a well-developed financial sector, with a thriving infrastructure for investment funds. Additionally, Luxembourg offers a favorable tax regime, making it an attractive destination for foreign investors.
Advantages of Luxembourg for Chinese Investors
Luxembourg offers several benefits to Chinese investors looking to invest in Europe. Firstly, it is a member of the European Union (EU), providing access to a large market with high standards of regulation. Secondly, Luxembourg has a highly skilled workforce, which makes it a hub for financial services and investment management. Thirdly, the country has a favorable tax regime for foreign investors, including a network of double taxation treaties with several countries, including China.
Luxembourg’s Investment Fund Regime
Luxembourg’s investment fund regime is one of the main reasons why it has become such a popular destination for Chinese Private Equity funds. The country offers a well-developed and flexible framework for investment funds, allowing PE funds to structure their investments in a way that meets their specific needs and goals. There are several types of investment funds available in Luxembourg, including regulated and unregulated funds.
Regulated Investment Funds in Luxembourg
Luxembourg is home to several regulated investment funds, including Undertakings for Collective Investments in Transferable Securities (UCITS), Specialized Investment Funds (SIFs), and Société d’Investissement en Capital à Risque (SICARs). These regulated funds offer a high level of protection for investors, with strict regulations in place to ensure their stability and security.
Unregulated Investment Funds in Luxembourg
Luxembourg also offers several unregulated investment funds, including Reserved Alternative Investment Funds (RAIFs), Société d’Investissement à Capital Variable-RAIF (SICAV-RAIFs), Société en commandite spéciale (SLPs), and Société de participation financière (SOPARFIs). These funds offer greater flexibility and fewer restrictions, allowing Chinese PE funds to structure their investments in a way that meets their specific needs and goals.
Growing Chinese Interest in Luxembourg
In recent years, there has been a significant increase in Chinese investment in Luxembourg. According to data from the Luxembourg Government, Chinese investment in the country grew by 14% in 2019, reaching €10.7 billion ($12.1 billion). The majority of this investment was made by Chinese PE funds, which were attracted to the country’s favorable investment climate, its well-developed financial sector, and its access to the European market.
Luxembourg has become a hub for Chinese PE investment in Europe, attracting funds with its favorable investment climate, well-developed financial sector, and favorable tax regime. The country offers a variety of investment vehicles, including regulated and unregulated funds, allowing Chinese PE funds to structure their investments in a way that meets their specific needs and goals. With Chinese investment in Luxembourg continuing to grow, it is likely that the country will remain a popular destination for Chinese PE funds in the coming years.
Damalion experts help Chinese clients to setup investment funds in Luxembourg. Contact your Damalion Chinese desk in Luxembourg now.
