Luxembourg UCITS

The UCITS (Undertaking for Collective Investment in Transferable Securities) is the globally recognized brand for retail investment funds, such as equity, bond, money market and mixed funds, as well as funds of funds.

With over US$2.5 trillion of assets in UCITS investment funds, Luxembourg is the No. 1 global center and distribution hub for UCITS.

UCITS can be distributed relatively easy to all investors – both retail and all types of institutional investors – in key distribution markets across Asia, Latin America, Europe and the Middle East.

Current and future developments impact UCITS, management companies, and service providers include:

• UCITS V
• UCITS VI
• European guidelines on exchange traded funds (ETFs) and other UCITS issues
• Luxembourg’s provisions on management company “substance”

Read more:

• UCITS
• The wider asset management agenda

Alternative Investment Fund Managers – AIFM

In 2013, a new regime will be implemented across the European Union (EU), regulating the managers of alternative investment funds (AIF) – i.e., investment funds that do not classify as UCITS. The objectives of the Alternative Investment Fund Managers Directive (AIFMD) include enhancing investor protection, increasing transparency for investors and regulators, and better managing systemic risks related to alternative funds.

Authorized AIFM will benefit from a passport to market the AIF they manage to professional investors throughout the EU, similar to the passport for the marketing of UCITS to retail investors. The AIFM regime is expected to create a global “AIF brand” comparable to the UCITS brand. Luxembourg is well positioned to “replicate” the Luxembourg UCITS success story for the distribution of alternative funds, benefiting from its reputation and expertise as a hub for UCITS products.

While the main focus of the AIFMD is on managers of alternative funds, the AIFMD will not only impact EU and non-EU AIFM, but also EU and non-EU domiciled Alternative Investment Funds (AIF), service providers to these funds and their investors.

The AIFMD has ramifications far beyond achieving basic compliance:

• Alternative investment groups (including promoters, sponsors, advisers, general partners and managers of all types of non-UCITS funds) should conduct a strategic review of their fund ranges and their operating models
• Service providers, especially depositaries, custodians, administrators and valuers, will also need to assess the strategic impact on their service offering and operating model and consider how they will react to new obligations and risks introduced by the AIFMD
• Investors will need to consider the accessibility of products, and the AIFMD’s impact on their investment process

Read more:

• Alternative Investment Fund Managers
• The wider asset management agenda

The Luxembourg Specialized Investment Fund − SIF

The Specialized Investment Fund (SIF) is Luxembourg’s leading alternative investment fund (AIF) investment fund vehicle. The SIF regime has been used extensively to launch all types of AIF products including hedge funds, private equity funds, real estate funds, commodities funds, thematic funds investing in specific segments (such a microfinance or the environment) or exotic assets (tangible such a luxury goods and intangible such as intellectual property), as well as traditional funds primarily for non-retail distribution.

The SIF regime may be used to create funds with different characteristics, such as multiple compartments (sub-funds), multiple share classes, direct and indirect funds, funds of funds, master-feeder structures, exchange traded products and structured products.

SIFs enjoy more flexibility than UCITS, especially in terms of eligible investments and structuring. SIFs may be offered to a wide range of eligible, well informed investors.

The Alternative Investment Fund Managers (AIFM) Directive will further boost its use significantly over the coming years.

Read more:

• The Luxembourg Specialized Investment Fund
• Alternative Investment Fund Managers
• The wider asset management agenda

The wider asset management agenda

Faced with a difficult economic environment, evolving needs of investors and distributors, an overwhelming regulatory and tax agenda, increased demands for robust governance and internal control and transparency, leading asset management industry groups are thinking beyond compliance and operations.

The asset management industry is responding to these challenges and opportunities by:

• Enhancing product ranges and product distribution
• Streamlining operating models (e.g., consolidation, cross-border servicing)
• Enhancing governance models
• Reviewing delegation arrangements
• Adopting a structured approach to managing regulation

Read more:

• The wider asset management agenda

Why Luxembourg for investment funds?

Luxembourg is the leading global location for all types of investment funds.

The success of Luxembourg in attracting investment funds, and becoming a major financial center, may be attributed to a number of factors such as:

• Reputation of the Luxembourg brand in the investment fund industry
• Attractive range of investment fund solutions
• Regulatory environment including accessibility, knowledge and responsiveness of the regulator
• Stability and certainty:
  • Political, economic and social environment
  • Legal environment and taxation regime
• Ability to achieve tax neutrality for products by considering direct and indirect taxation implications at fund and investor levels
• Operational factors such as relocation costs, local infrastructure, and the qualifications and knowledge of the multicultural, multilingual international workforce
• Service provider considerations such as their expertise and ability to meet specific local distribution market requirements from Luxembourg
• Central location at the heart of Europe with easy access to other financial centers

Read more:

• Investment Funds in Luxembourg, September 2012
• Luxembourg UCITS
• The Luxembourg Specialized Investment Fund