In Part 1 of this series, we looked at Luxembourg’s unregulated investment vehicles, in this second part, we turn to regulated investment vehicles – funds which require prior authorisation by the Commission de Surveillance du Secteur Financier (CSSF) and remain subject to its ongoing prudential supervision. Regulation brings higher set-up and running costs, but in return offers investor protection, credibility with institutional investors and, in some cases, a European distribution passport.
Regulated investment vehicles
Each regulated vehicle is established under its own law and may generally adopt either a contractual form (FCP – fonds commun de placement, managed by a management company) or a corporate form (SICAV/SICAF), using one of the company forms described in Part 1, such as the S.A., SCA, SCS or SCSp.
Types of regulated investment vehicles:
UCITS (Undertakings for Collective Investment in Transferable Securities) – Part I of the Law of 17 December 2010 on Undertakings for Collective Investment (UCI Law)
The flagship retail product, investing in transferable securities and other liquid financial assets under strict risk-diversification rules. UCITS benefit from the EU passport and may be freely marketed to retail investors across the European Union. The capital of a minimum of 1,250,000 EUR must be reached within six months of authorization.
Part II UCI Law
An alternative investment fund open to all categories of investors, including retail. It offers considerable flexibility as to eligible assets and investment policy, which has recently made it a popular wrapper for semi-liquid private-market strategies, including ELTIF (European Long-Term Investment Fund) structures.
SIF (Specialised Investment Fund) – Law of 13 February 2007
A highly flexible multi-purpose vehicle reserved for well-informed investors. A SIF may invest in any asset class, subject to the principle of risk spreading (as a rule, no more than 30% of assets in a single investment), and requires minimum capital of 1,250,000 EUR.
SICAR (Société d’Investissement en Capital à Risque / Investment Company in Risk Capital) – Law of 15 June 2004
Designed specifically for private equity and venture capital investments. It is likewise reserved for well-informed investors, but –unlike the SIF– is not subject to any risk-diversification requirement. The minimum subscribed capital is 1,000,000 EUR.
The SIF and SICAR are reserved for well-informed investors. Besides institutional and professional investors, this also includes private individuals and other investors who declare in writing – typically in the subscription agreement – that they adhere to the status of well-informed investor; for them, the minimum investment is EUR 100,000 (threshold reduced from EUR 125,000 by the Law of 21 July 2023). A smaller investment is possible only if a credit institution, investment firm, management company or authorised AIFM certifies in writing that the investor has the expertise, experience and knowledge to adequately appraise the contemplated investment.
In the final, third part of this series, we will look at indirectly regulated vehicles – above all the RAIF (Reserved Alternative Investment Fund) which combines the structuring flexibility of the SIF with a faster, CSSF-free launch.
Planning to set up an investment fund? Want to learn more about the different investment vehicles in Luxembourg? Drop us an email (office@bensonformations.com) or give us a call (+44 20 3974 1244) at any time.
