A globally leading fund centre:
Luxembourg is the globally leading fund centre in the world for cross-border funds, Luxembourg is 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 an investment 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.
Why set up an investment fund?
Investment funds are collective investment vehicles, which invest in assets and may operate according to the principle of risk spreading. Investment funds may raise capital from the public, when capital is raised from a group of investors that go beyond a small circle of persons or may raise capital in a private placement from a selected group of investors. Issuing vehicles, holding companies or special purpose vehicles (SPVs) are often not considered investment funds, although they might fulfill the above criteria.
What is the SIF?
The Specialised Investment Fund (SIF) is an investment fund in Luxembourg that can invest into any asset class and that is subject to the Luxembourg Law of 13 February 2007 (the SIF Law).
The SIF is subject to the approval and ongoing supervision by the Luxembourg Financial Supervisory Authority (Commission de Surveillance du Secteur Financier or CSSF).
According to the CSSF, there were around 1448 SIFs established in Luxembourg as of March 2020 with more than EUR 600 billion of assets under management.
Which investors are eligible to invest into a SIF?
Investments in a SIF may be made by “well-informed investors”. These are defined as:
1.Institutional investors;
2. Professional investors; or
3. Any other investors who have stated in writing that they adhere to the status of a “well-informed investor” and either (i) invest a minimum of €125,000 or (ii) have obtained an appraisal from a credit institution, an investment enterprise or a management company, certifying the investor’s expertise, experience and knowledge in adequately appraising an investment in the SIF.
Who manages the SIF?
SIFs must appoint an authorised external Alternative Investment Fund Manager (AIFM), if they fall within the scope of the Alternative Investment Fund Managers Directive (AIFMD). As a benefit of the appointment of the AIFM, SIFs may be marketed to professional investors and other well-informed investors in the EU on the basis of the AIFMD passport. The AIFM may be established in Luxembourg or in another EU Member State.
What are the main advantages of the SIF?
The main advantages of the SIF are:
1. Structuring flexibility: The SIF may be established as an investment company with variable capital (SICAV) or an investment company with fixed capital (SICAF). The SIF may also be created as a contractual fund or fonds commun de placement (FCP), with no legal personality and a management company managing the FCP. The SICAV and SICAF may be established in various corporate forms available under Luxembourg law: (i) public limited company (SA), (ii) private limited company (S.àr.l.), (iii) limited partnership (CLP), (iv) special limited partnership (SLP) or (v) partnership limited by shares (SCA))
2. Umbrella fund: The SIF may be set up as a single fund or an umbrella fund with multiple ring-fenced compartments or sub-funds. Depending on the needs of the investors, the compartments may also have an unlimited number of shares or unit classes.
3. No asset restriction: The SIF is not restricted to any asset type. That allows the SIF to be flexible with its investment policy. The SIF has however to the follow risk diversification rules set out by the CSSF.
4. Asset protection: The assets of the SIF must be entrusted to a custodian or depositary, who must either have its registered office in Luxembourg or have a Luxembourg branch, if the registered office is in another EU Member State.
5. Supervision: The SIF has to be authorised before beginning its activity and remains under the supervision of the CSSF. This supervision adds a layer of protection often required by institutional investors. If the SIF falls within the scope of the AIFMD, the SIF has to appoint additionally an AIFM, which is also an entity supervised by the competent authority of the AIFM.
6. Attractive tax regime: The SIF is exempt from most Luxembourg taxes, with the exception of a 0,01% subscription tax on the net asset value of the fund.
Which service providers does a SIF require?
The SIF must appoint the following service providers:
1. Luxembourg depository or custodian bank
2. Authorised external AIFM, if within the scope of the AIFMD
3.Statutory auditor approved by the CSSF to act for regulated funds
4. Central administrator based in Luxembourg
Does the SIF have access to the EU passport for distribution of the fund?
The SIF may take advantage of the EU passport, if it has appointed an AIFM, allowing the fund to be passported to well-informed investors within the EU.
How long does it take to set up a SIF in Luxembourg?
A SIF is subject to supervision by the CSSF and can thus be established once approved by the CSSF, typically 2-3 months. The timeframe for the drafting of the documentation, will depend on the complexity and the input of all parties involved.
What are the capital requirements of a SIF?
The minimum net assets of a SIF may not be less than EUR 1.250.000. This amount must be reached within a period of twelve months following its establishment. At least 5% of the capital must be paid up at subscription.
How much does it cost to establish a SIF?
The cost of setting up a SIF differ, depending on the exact structure and the service providers used.
As the SIF is a supervised fund, CSSF approval must be obtained and CSSF fees paid, as set out in the Grand-ducal Regulation of 21 December 2017 relating to the fees to be levied by the CSSF.
The CSSF will levy an examination fee, which is a single lump sum for the examination of each authorisation request for a SIF. This examination fee currently amounts to:
- EUR 4,000 for traditional SIFs and SIF-AIFs
- EUR 8,000 for umbrella SIFs and SIF-AIFs
In addition, an annual lump sum is to be paid by each SIF to the CSSF:
1.EUR 4,000 for traditional SIFs and SIF-AIFs
2. EUR 8,000 for umbrella SIFs and SIF-AIFs for 1-5 subfunds
3. EUR 15,000 for umbrella SIFs and SIF-AIFs for 6-20 subfunds
4. EUR 24,000 for umbrella SIFs and SIF-AIFs for 21-50 subfunds
5. EUR 35,000 for umbrella SIFs and SIF-AIFs for over 50 subfunds
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