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%
What is a Luxembourg Specialised Investment Fund?
SIFs are lightly regulated, operationally flexible and fiscally neutral multi-purpose investment fund vehicles. A SIF is open to qualified investors.
A Luxembourg SIF is regulated by the CSSF. Currently there are over 1500 SIFs setup in the country, with over EUR 650 billion of assets under management.
What assets can the SIF invest in?
SIFs can invest in any assets, across geographies. These can include illiquid assets, alternative investments, listed and unlisted equities as well. However, unlike a SICAR, asset diversification rules apply to a SIF.
Can a SIF be sold to all investors?
A Luxembourg SIF 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 RAIF.
Can a SIF obtain an EU Passport?
Yes it can. The SIF 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 SIF in Luxembourg
The following are the advantages of setting up a SIF 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 a contractual fund (FCP) with no legal personality and managed by a management company.
- Can be setup as an Umbrella Fund as well, with multiple compartments
- Asset protection – The SIF has to appoint an eligible custodian, that has to be present in Luxembourg, either directly or through a branch office.
- Supervision – The SIF 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.
- Tax attractiveness – The SIF is exempt from most Luxembourg taxes. There is a 0.01% tax on the net asset value of the fund.
Does the SIF have to appoint any service providers?
Yes, since it is regulated by the CSSF. At the least, the SIF 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 SIF falls within the scope of the AIFMD.
How fast can a SIF be set up?
Since it is a regulated structure, a SIF typically takes 2-3 months to be fully setup.
What are the capital requirements for a Luxembourg SIF?
The minimum net assets of a SIF should be more than EUR 1.25 million. This amount must be reached within a period of twelve months following the formation of the SIF. 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:
(i.)Reviewing the business model and advice on the applicable regulatory framework;
(ii.) Preparation of all the required documentation, including Private Placement
(iii.)Memorandums and agreements;
(iv.)Provision of compliance and bookkeeping services; and
(v.)Finalisation of registered space and bank account opening.
(vi.)In fact, we can do all this without you having to visit Luxembourg!
Get in touch! for more information on Specialised Investment Fund (SIF) in Luxembourg
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