Founded on the success of its traditional investment fund industry and extensive capabilities in the structuring and execution of international private equity transactions built over a period of more than 20 years, Luxembourg has also emerged as a leading European domicile for alternative investment funds (AIFs).
Its appeal stems from multiple factors that combine to create a business-friendly environment:
Contract-based company law provisions.
Responsiveness of Luxembourg legislation to practitioners’ needs.
A multilingual community of professional service providers.
Experienced and business-oriented regulatory and tax authorities.
A stable political, economic and social environment.
The rapid development of Luxembourg's alternative investment fund servicing infrastructure has been accompanied by a steady evolution of the country's legal structuring toolbox. This facilitates legal structuring solutions comprising both special purpose vehicles and investment vehicles, including the Soparfi (financial participation company/société de participations financières), SICAR (risk capital investment company/société d’investissement en capital risque), SIF (specialised investment fund/fonds d’investissement spécialisé), Luxembourg limited partnership structures, and, most recently, the RAIF (reserved alternative investment fund/fonds d’investissement alternatif réservé).
This scope and flexibility have enabled Luxembourg to become the leading EU centre for domiciling both AIFs and their acquisition vehicles in the same jurisdiction. No other EU or offshore domicile can claim the same capability and industry-friendliness in today's fast-changing international legal, regulatory and tax environment.
The AIFMD and Luxembourg's private equity sector
The EU's Alternative Investment Fund Managers Directive (AIFMD) has raised a number of challenges for the alternative fund sector. Private equity fund managers are now divided into sub-threshold or small alternative investment fund managers (AIFMs) and authorised AIFMs.
While small AIFMs are subject only to registration requirements in the jurisdiction in which they are established, they are not entitled to the benefits of the AIFMD, such as the marketing passport. Under the AIFMD environment, their distribution is mostly confined to the domestic market, with very limited private placement options in other member states. Small managers wishing to expand their fundraising capabilities thus face significant hurdles within the EU.
Authorised AIFMs are entitled to market their AIFs to professional investors, both in their home jurisdiction and in other member states, and may manage AIFs domiciled in other member states as well as non-EU countries. The AIFMD's regulatory framework is intended to help monitor systemic risk at EU and international level, harmonise investor protection standards, and create a genuine single market.
How can we assist you?
Luxembourg is the leading European domicile for international alternative investment fund structuring and transactions. In this complex legal, tax and regulatory environment, our dedicated and experienced team fully understands the evolving private equity market and the high expectations of our clients. In particular, our team is well aware of the importance of providing top-quality legal and tax advice in a timely and practical manner, enabling our clients to respond quickly to opportunities in this highly competitive environment.
We tailor our services to the diverse expectations of our clients, who range from private equity houses and fund managers to professional investors, financial institutions and funds of funds. We have built up a dedicated team focused on alternative fund structuring and transactions, combining the alternative fund experience and expertise of our corporate, tax and regulatory specialists.
Arendt's alternative investment fund practice sets itself apart from its competitors with a one-stop shop providing high- quality services across the board. We represent private equity managers in all aspects of their operations, design tax-efficient structures incorporating innovative features where necessary, and assist in the establishment of practically every type of funds. Our lawyers are familiar with the dynamics of the various stages of the fundraising cycle, as well as investment, covering all legal, regulatory and tax aspects, including VAT issues and assessment of AIFMD scope.