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The regulation of investment funds in Luxembourg

Published:
April 6, 2021
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A Specialized Investment Fund (SIF) is a structure that can invest in a wide range of assets. It normally qualifies as Alternative Investment Fund (AIF) and can be offered to qualified financial investors.

Eternity Law International offers investment fund in Luxembourg for sale and can also provide services of formation of investment fund in Luxembourg on your request. Contact us to discover more!

Legitimate system

SIFs are regulated by the Luxembourg Law of 13 February 2007 (SIF Law). The SIF system was amended by the Law of 12 July 2013 on Alternative Investment Fund Managers (AIFM Law). Accordingly, the SIF Law is presently separated into two sections: (I) general terms applicable to all SIFs, and (ii) explicit arrangements appropriate to SIFs which qualify as Alternative Investment Funds (AIFs) and which are needed to be managed by an approved Alternative Investment Fund Manager (AIFM). Because of the wide meaning of AIFs, most SIFs qualify as AIFs.

SIFs putting short-term investments and having distinctive or combined goals offering returns in accordance with currencies market rates or saving the estimation of the speculation should additionally conform to the requirements of The Regulation (EU) 2017/1131 on currency market funds.

There are some extra requirements that must be fulfilled at state as well as EU level (for example concerning AML, MiFID, market misuse, subsidiaries).

Legal form of the funds

The SIF might be established in various structures:

  • A fond commun de situation (FCP), for example a typical fund. The FCP has no legal personality and should be controlled by a Luxembourg the board organization;
  • A société d’investissement à capital variable (SICAV) or société d’investissement à capital fixe (SICAF), for example open- or closed-ended venture organizations with variable capital and fixed capital requrements.

The FCP or SICAV/SICAF might be set up as a fund or as an umbrella construction with different branches. The fund separately may have a limitless number of stakes/unit classes.

Authorisation

SIF should be approved by the Commission de Surveillance du Secteur Financier (CSSF) prior to starting its action. A while later, it is directed by the CSSF on a continuous premise for example through normal reporting. The CSSF charges a yearly costs for its administrative action.

The reports and data are ussually arranged and submitted to the CSSF with the help of lawyers  as well as a bank managers in Luxembourg.

The CSSF keeps a list of the approved SIFs that are dependent upon its oversight. A SIF may begin business when authorisation has been issued.

Capital base

The net resources of a SIF may not be not exactly EUR 1,250.000. This base should be reached inside a time of a year following its authorisation. Minimum 5% of the capital should be settled up at start.

Disclosure conditions and financial reports

SIF should set up a plan or offering brochure, a PRIIP Key Information Document (KID) if retail intestors can make investments, and a yearly report. There is no commitment to set up a semi-yearly report.

Arrangement of an AIFM

SIFs that qualify as AIFs are needed to choose an AIFM except if they benefit from the restricted exclusions given by the AIFM Law. SIFs qualifying as AIFs may either name an outside AIFM (the administration organization of the fund is delegated as AIFM) or decide to be inside managed. In the last case, the SIF will itself be considered as the AIFM and should fulfill all requirements of the AIFM Law.

Services providers

A typical fund should be controlled by a management organization, while a SICAV/SICAF may either act as self-managed. The administration organization of a FCP should draw up the administration guidelines for the common fund. Self-managed SICAV/SICAFs may just oversee resources of their own portfolio and may not oversee resources in the interest of other parties. The AIFM of a SIF should be located in Luxembourg.

A SIF should designate a Luxembourg depositary which is in addition to other things answerable for the supervision of assets. The qualified depositories are Luxembourg credit establishments, yet in addition Luxembourg financial companies satisfying certain prerequisites set by the Law of 5 April 1993 on the financial sector.

The heads of the SIF and of the depositary should have adequate and pertinent experience.

The yearly report should be reviewed by an approved independent inspector with professional  experience.

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