A GLOBAL CENTRE FOR INVESTMENT FUNDS
Luxembourg is a global centre for investment funds, the second largest fund jurisdiction in the world, after the United States. It is the largest centre for funds in Europe, with over Euro 4.5 trillion in cumulative assets under management in supervised funds alone.
Why setup an investment fund in Luxembourg?
The country is:
- A founding member of the EU.
- Politically stable.
- Financially stable.
- Access to over 500 million EU residents.
- Reliable investment regulations.
- Over 4,200 supervised investment vehicles with around 14,500 sub-funds.
- A competitive framework for passporting of funds within the EU.
- Luxembourg funds are sold in more than 70 countries and is the leading jurisdiction for fund distribution.
- A responsive and globally recognized financial regulator.
- A wide range of supervised and non-supervised investment funds.
- UCITS and AIFs.
- Umbrella funds.
- Non-supervised funds.
- Depending on the need of investors, Luxembourg offers tax exempt, tax neutral or taxable investment vehicles,
- Some exemptions for VAT payments;
- Funds may access Double Taxation Avoidance Treaty benefits or establish SPVs that would have access.
Luxembourg funds and the GCC:
Luxembourg is a jurisdiction of choice for investors based in the GCC. While the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) also offer fund structures, Luxembourg funds have more diverse options, including SLPs – that can be unsupervised and allow for greater flexibility for lower AUMs.
Luxembourg is an excellent jurisdiction for startup funds due to lower setup and maintenance costs, in some cases, as low as 35% of the costs in similar onshore jurisdictions in the GCC. They can be established quickly, are more flexible and can easily be upgraded to supervised or passportable funds once higher AUMs are achieved.
Luxembourg funds can also be managed from the DIFC (and ADGM), by setting up a restricted fund manager. This allows for greater comfort to prospective investors, besides opening an option for directly marketing and passporting the fund within the UAE.
Most large banks and investment managers in the UAE and the GCC have Luxembourg fund options. In fact, Luxembourg domiciled investment funds dominate among foreign funds sold in the GCC.
United Arab Emirates – 64% of foreign funds are Luxembourg funds
Saudi Arabia – 50%
Kuwait – 75%
Bahrain – 75%
Oman – 99%
Qatar – 98%
Investment Company in Risk Capital (SICAR) in Luxembourg
The investment company in risk capital (SICAR) is an investment fund structure in Luxembourg. It is governed by the SICAR Law of 2004, and can mainly invest into risk-bearing assets, without the requirement of spreading or diversifying the risk. The SICAR is only open to qualified investors.
A Luxembourg SICAR is regulated by the CSSF. Currently there are over 250 SICARs setup in Luxembourg, with over EUR 58 billion of assets under management.
What assets can the SICAR invest in?
Usually, SICARs invest in unlisted companies, whether in the form of equity or debt. They can also invest in any geography, not just the European Union. Investments into listen companies can also qualify in some instances, for example, when the investment aims to finance a new line of business.
There is no requirement for the SICAR to diversify it’s risks.
Can a SICAR be sold to all investors?
A Luxembourg SICAR can only be sold to qualified investors, which include institutions and professional investors.
In some cases, prospective investors can declare that they a) can invest a minimum of Euro 125,000 or obtain a confirmation from a credit institution, an investment bank or a management company, certifying their expertise, experience and knowledge in sufficiently judging and understanding the implications of an investment made in the SICAR.
Can a SICAR obtain an EU Passport?
Yes it can. The SICAR will have to appoint an AIFM (established in any EU state, including Luxembourg) to benefit from passporting rights in the EU. It can then be sold to qualifying investors.
Advantages of setting up a SICAR in Luxembourg
The following are the advantages of setting up a SICAR in Luxembourg:
- Can be established as a SICAV or SICAF. These can be established as public limited companies (SA), Private limited company (SARL), limited partnerships, special limited partnerships (SLP) or partnerships limited by shares (SCA).
- Can be setup as an Umbrella Fund as well, with multiple compartments.
- Asset protection – The SICAR has to appoint an eligible custodian, that has to be present in Luxembourg, either directly or through a branch office.
- Supervision – The SICAR is supervised directly by the CSSF. In case the SICAR falls under the purview of the AIFMD, then it has to appoint a regulated AIFM, which adds an additional layer of regulation and protection for the investors.
- No requirements for diversification of risk.
- Tax attractiveness – The SICAR can be formed as a limited partnership without legal personality (CLP or SLP). In this case, it would act as a tax passthrough structure. The SICAR can also formed with a legal personality (SCA, SA or SARL). In this case, the structure is taxable, with income from transferable securities being exempt, subject to meeting of certain conditions. However, in this case, the SICAR can access the double-taxation avoidance treaties that Luxembourg has signed with many countries around the globe.
Does the SICAR have to appoint any service providers?
Yes, since it is regulated by the CSSF. At the least, the SICAR must appoint a Luxembourg-based eligible custodian, an auditor and a central administrator based in Luxembourg. It would also have to appoint an AIFM, if the SICAR falls within the scope of the AIFMD.
How fast can a SICAR be set up?
Since it is a regulated structure, a SICAR typically takes 2-3 months to be fully setup.
What are the capital requirements for a Luxembourg SICAR?
The minimum net assets of a SICAR should be more than EUR 1.25 million. This amount must be reached within a period of twelve months following the formation of the SICAR. At least 5% of the capital must be paid up at subscription.
How can we at 10 Leaves help you?
We provide turnkey services for Luxembourg structures.
From initial consulting, to assistance in authorisations, to assistance in preparation of the legal documentation, 10 Leaves helps you navigate the legal framework in Luxembourg and submit an application that is comprehensive, complete and compliant.
Our services include assistance in:
1. Reviewing the business model and advice on the applicable regulatory framework;
2. Preparation of all the required documentation, including Private Placement Memorandums and agreements;
3. Provision of compliance and bookkeeping services; and
4. Finalisation of registered space and bank account opening.
5. In fact, we can do all this without you having to visit Luxembourg! Get in touch!
For More Information, View Our Luxembourg Brochure