What is a fund distribution platform?
There are a variety of fund distribution platforms available and their number is constantly increasing. Banks were traditionally the first contact point for retail investors and offer their own funds to their customers. This is changing in recent years, as retail investors are having direct access to fund platforms. This has caused a strong growth of the retail fund market globally, as investors are investing directly through such fund platforms in investment fund.
These fund platforms range from global fund distribution platforms, to digital fund platforms available in selected market. Platforms offer investors a one-stop-solution for their investments and have clear benefits for the asset managers, as they simplify and streamline onboarding procedures and the KYC/AML procedures.
How to onboard your fund on a fund distribution platform?
We may assist you in identifying the right fund platform and assist you in the onboarding process on different well-established and innovative fund platforms. In order to commence the process, we will assist you in choosing the right investment fund vehicle in Luxembourg. Based on this decision, we will be able to provide you with possible fund platforms.
Establishing a fund in Luxembourg and launching it on a fund distribution platform:
There are different fund types in Luxembourg. Depending on the needs of investors and promoters, you can choose the most suitable fund type:
- UCITS: (Undertaking for Collective Investment in Transferable Securities) is the leading globally distributed investment fund product. UCITS is a highly regulated retail product, supervised by the CSSF (the Luxembourg supervisory authority of the financial sector) that may invest in listed securities, bonds, index components and assimilated assets. It is subject to strict rules in investment and diversification and can be set-up as an umbrella structure. UCITS benefit from a European passport, meaning that once authorised by the CSSF in Luxembourg, they can be distributed to the public in all other EU Member States, on the basis of a formalized procedure. Due to its global reputation as a European retail fund, many countries around the world recognize the UCITS standard, making this the globally leading fund type distributed around the world.
- PART II FUND: is a supervised fund that can also be sold to the public, but that does not benefit from the UCITS passport, as it is not compliant with the UCITS rules or the investment policy. This fund type might be able to qualify for the AIFMD passport, provided that certain conditions are met.
- SIF: (Specialised Investment Fund) is a more flexible investment fund that is available for all asset classes and investment strategies. It is a supervised corporate vehicle, reserved for well-informed and professional investors. A low level of diversification is required, and the SIF can also be set up as an umbrella fund. The SIF may also qualify for the AIFMD passport, provided the conditions are met.
- SICAR: (Investment Company in Risk Capital) is also a supervised investment vehicle, which has the principal purpose of investing in risk-bearing assets. The SICAR is not subject to any diversification rules but is restricted to well-informed and professional investors. The SICAR may also qualify for the AIFMD passport, provided the conditions are met.
- RAIF: (Reserved Alternative Investment Fund) was introduced in 2016 and has been a highly successful fund type. It is structurally similar to the SIF or SICAR regime but is not subject to a direct supervision by the CSSF. The RAIF can also be set up as an umbrella structure. The RAIF however has to appoint an AIFM (Alternative Investment Manager) in Luxembourg, which itself is regulated by the CSSF, but can therefore benefit from the AIFMD passport.
- Special Limited Partnership and Common Limited Partnership: (SCS/SCSp) are highly flexible fund structures that are not supervised. The limited partnership agreement (LPA) is the main document organizing the functioning of the partnership, which gives the fund the contractual flexibility to organize the structure of the fund. This fund type is not restricted to any asset type and not subject to any risk diversification rules. This fund type is tax transparent.
- Securitisation Vehicles: (SV) are investment vehicles, that can be set up as an alternative investment vehicle to the fund vehicles mentioned above. The SV is flexible in nature and can either be set up as a corporate entity or a securitization fund. The SV can be set up as an umbrella structure with multiple compartments and is required to issue securities (bonds, notes, etc.) in relation to an underlying risk (receivables, credit risk or any other form of risk). In principle the SV is not supervised, provided that the SV does not issue on a continuous basis to the public.
How long will it take to establish a fund in Luxembourg and register it on a fund distribution platform
The length of establishment depends on whether the fund is a supervised or non-supervised fund vehicle. Whilst a non-supervised investment vehicle can be set up within 2 weeks, a supervised vehicle can be established with 2-4 months, depending on the complexity of the fund structure and its investment policy.
After the constitution of the fund, it can be registered on a fund distribution platform. The onboarding process can take around 1 months with smaller innovative distribution platforms and several months with more established global distribution platforms.
What are the costs of establishing a fund in Luxembourg?
As Luxembourg offers toolbox of different solutions, this greatly varies between the solution chosen and the service providers used to service the fund. Setting up a fund which is not supervised, is less costly than a supervised fund targeted for retail clients.
Which fund type are the most popular?
The UCITS is traditionally the most popular retail fund on fund distribution platforms. However, most recently the RAIF and the Special Limited Partnership (SCSp or SLP) are becoming present on fund platform. This is due to the features of both funds, allowing them to be established and distributed within a short time frame:
- Reserved Alternative Investment Fund:
- Establishment within 4-6 weeks
- No regulatory approval required
- Unsupervised fund
- EU passporting rights through AIFM
- Can invest in any asset type
- Special Limited Partnership:
- Establishment within 2-3 weeks
- No regulatory approval
- Unsupervised fund
- Appointment of regulated AIFM is not mandatory, if sub-threshold (below EUR 100 Million)
- EU passporting possible through AIFM
- No Custodian required, if sub-threshold
- Tax transparent fund
- Can invest in any asset type
- High contractual flexibility
Reach out to us, to learn more about the different Luxembourg fund types and the fund distribution platforms
