How to set up an investment fund in Luxembourg

How to set up an investment fund in Luxembourg

In the Grand Duchy of Luxembourg, the sector of investing is largely taking advantage of its location in a leading financial center. This is now a global hub for financial vehicles. The most prominent merit of the country is its ongoing supporting politics for investors to build on a stable, secure, and business-friendly climate for investment funds set up in Luxembourg answering to the rapid growth of the markets.

Overview of legit and regulative basis

Currently, investors willing to establish a financial vehicle can make a decision among the following categories of Luxembourg-domiciled funds when they consider incorporating their vehicles:

  • Undertakings for Cοllective Ιnvestment in shares and other securities (UCΙTS);
  • Undertakings for Cοllective Ιnvestment (UCIs);
  • Specialized or Αlternative Ιnvestment Funds (SIF);
  • Capital Risk Ιnvestment Company (SΙCAR);
  • Securitization Undertakings.

Prior to the formation of a fund, it is essential to estimate the needs and expectations of the investors and choose the most suitable level of regulative oversight.

When it comes to legal regulation, some funds, for example, UCITS, are strongly supervised and some like SIF do not fall under regulative supervision. Whilst for some funds any type of investment strategy is permitted without any restriction whatsoever provided that its manager aims to spread the risks, some others might be bounded. Not every investor is eligible to contribute to one or another vehicle. Hence it makes sense to decide on the one which will be the best fit for the certain type of investing parties.

Once decided, the next step is to find the right structure of a legal entity to form a fund. The SICAV can be registered as a PLC; LLC; a Partnership Limited by Shares or as a Co-op in the form of a PLC. A SICAV may take the form of a Holding Fund created by a few subfunds, each of which is non-dependent on the others. In addition, an investor may take into consideration alternative ways of setting up a fund such as Special Limited Partnerships. All of these decisions on the form of financial vehicles will define how a fund administrator will distribute and market it.

Costs to form an investment fund

Subject to the above-mentioned parameters, the initial costs for the formation of a fund start from 25,000 euros. The operational expenses are approximately 20,000 euros annually and will grow with the asset under administration, the custodian services, auditing, advertising, etc.

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