What is a SICAV?
A SICAV (société d’investissement à capital variable) is an investment company that has a variable share capital. It is a legal form that can be chosen in Luxembourg, under different legal fund regimes. The SICAV was introduced in 1983 in Luxembourg and allowed to establish an investment company with a capital that may constantly vary. Its capital is at all times equal to the net asset value of the company, meaning the value of all assets after deduction of its liabilities. Its capital fluctuates and depends on the valuation of its assets, as well as the subscription and redemption of shares.
Which fund types can be set up as a SICAV?
The following fund types can be established as investment companies with variable capital:
1.UCITS :(Undertaking for Collective Investment in Transferable Securities) is the leading globally distributed investment fund product.
(i.)UCITS is a highly regulated retail fund, supervised by the CSSF.
(ii.)It is subject to strict rules in investment and diversification and may only invest in listed securities, bonds, index components and assimilated assets.
(iii.)UCITS funds 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.
(iv.)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.
2. SIF: (Specialised Investment Fund) is a highly flexible fund.
(i.)The SIF is reserved for well-informed and professional investors.
(ii.)The fund can either hold participations or hold assets directly.
(iii.)The SIF requires a low level of diversification of around 30% per asset.
(iv.)The fund may also qualify for the AIFMD passport, provided the conditions are met.
3. RAIF: (Reserved Alternative Investment Fund) has been a highly successful fund type since its introduction in 2016. The RAIF allows for a significantly reduced time to market, with the option to transform later to a SIF or SICAR.
(i.)The RAIF is structurally similar to the SIF or SICAR (Investment company in risk capital) regime but is not subject to a direct supervision by the CSSF.
(ii.)The RAIF 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.
Why set up a SICAV in Luxembourg?
Luxembourg offers a toolbox of solutions to establish an investment fund with variable capital. Setting up a fund in the form of a SICAV has a variety of advantages:
1. Choice of fund platforms: Fund promoters have the choice between supervised or non-supervised funds. Depending on investor demands, they can either opt for:
(ii.)A fund that is not supervised, quickly set up and needs no approval by the Luxembourg Financial Supervisory Authority (Commission de Surveillance du Secteur Financier or CSSF),
(iii.)a fund that is supervised by the CSSF, or
(iv.)a fund that is not supervised but has appointed a supervised Alternative Investment Fund Manager (AIFM).
2. Investor protection: Investors are comfortable with Luxembourg, as it has the following advantages for investors:
(i.)it is a reputable fund jurisdiction with established legal frameworks for funds and investment vehicles,
(ii.)professional and globally recognized fund service providers are established in Luxembourg,
(iii.)depository/custodian is in Luxembourg.
3. Distribution: The fund could be distributed on the basis of the EU passport, (either UCITS or AIFMD passport).
Luxembourg is the globally leading fund centre in the world for cross-border funds, the second largest investment fund centre in the world after the United States and the largest fund domicile in Europe with currently more than EUR 4,7 trillion of assets under management.
The country is a politically and financially stable EU country with a AAA-Rating. As an EU domicile, investment funds established in Luxembourg can be more easily distributed within the EU and have gained furthermore global recognition for the ease of cross-border distribution.
The key advantages of Luxembourg as a fund domicile are:
1. Stability:
Luxembourg is a stable and recognized fund centre in the heart of Europe, ideally positioned to use the EU passporting rights to distribute the fund across the EU and to global markets.
2. Global Leadership:
Luxembourg is the global leader for cross-border fund distribution. All relevant service providers in the asset management industry have a presence and offer services in Luxembourg. The country is known around the world for its capabilities in asset management and its funds are distributed and known around the world.
3. One Stop Solution:
Setting up a fund with an EU passport, using leading service providers, listing it on a recognized stock exchange, setting up SPVs to benefit from double tax treaties and outsourcing certain functions back to other countries. Luxembourg has the flexibility to offer a one stop solution for operating and distributing investment funds, as well as deploying the funds in an efficient and structured manner.
How long does it take to establish a SICAV in Luxembourg?
The time to set-up depends on whether the fund is a supervised or non-supervised fund. A non-supervised fund can be set up within a couple of weeks, whilst a fund on a supervised platform might take several months, depending on the complexity of the fund and the time of approval by the CSSF.
How much does it cost to establish?
As Luxembourg offers a toolbox of different solutions, the establishment and running cost greatly varies between the solution chosen and the service providers used to service the fund.
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