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%
What is a Luxembourg Limited Partnership?
Limited partnerships are fund types that usually have illiquid strategies. They have been modelled on partnerships that can be setup in other jurisdictions such as United States, United Kingdom and the Cayman Islands.
Such funds invest into venture capital/private equity, debt markets or real estate. The AIFMD introduced in 2013 was instrumental in helping Luxembourg become a leading jurisdiction for funds that invest in alternative assets.
The partnership comprises a General Partner (LP), usually a SARL, and Limited Partners who are investors. This arrangement is governed by the Limited Partnership Agreement, or LPA. A Luxembourg Limited Partnership is not subject to any asset diversification requirements, nor any specific asset type.
Types of Luxembourg Limited Partnerships:
There are three types of Limited Partnerships. The first is a Partnership Limited by Shares, or SCA. Structurally, the SCA is like a Public Limited Company.
The second is the Common Limited Partnership, commonly known as SCS or CLP. And the third, and most frequently used is the Special Limited Partnership, or SLP.
An SCA and a CLP have a legal personality, unlike an SLP. Other notable differences between an SCA and the CLP/SLP strutures is that the latter can be formed in front of a notary or by private deed, and typically governed by the Limited Partnership Agreement, unlike the SCA which comes under Company Law.
Also, the SCA is subject to taxation (but has access to double-taxation avoidance treaties), while the CLP and SLP are tax-passthrough structures.
Are there any options for Luxembourg Limited Partnerships to get regulated?
Limited Partnerships that are established as Special Investment Funds (SIF) or Investment Companies in Risk Capital (SICAR), have the option to be regulated by the CSSF. The fund would need to appoint an AIFM, in case it falls within the ambit of the AIFMD.
The Limited Partnership can access the benefits of EU-wide passporting, if it appoints an AIFM.
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.
Do get in touch with us today! for more information on Luxembourg Limited Partnership
For More Details, View Our Luxembourg Brochure