Luxembourg funds

Luxembourg is one of nine AAA-rated countries in the world, with a public debt of only 24.4% of GDP and growth consistently above the EU average. 

It occupies a leading global position in the fund industry and in recent years has developed alternative and innovative solutions for each asset class with a favourable regulatory and tax environment.

Aeffe Capital and its partners will be able to support the client from the conception of the project, to the setting up of any type of Luxembourg vehicle, sharing with the client the strategy, the type of assets to be brought into the fund, the residence of the investors to then identify the structure that will best suit the shareholders’ needs such as a RAIF (Reserved Alternative Investment Fund) or a SIF (Specialised Investment Fund). 

At an early stage, if the assets will not be excessively important and if the project requires it, a “lighter” structure such as SCsP (Special Limited Partnership) can be preferred in order to reduce set-up costs and allow the client to start with its fund project.

Following the first exploratory meeting or video call and after having identified the structure, Aeffe Capital S.A will select the different counterparties that will be involved in setting up the vehicle, analyse their offer to choose the right partner that will meet the client’s needs, in terms of efficiency and costs, identifying:

  • the law firm that will prepare the fund’s offering documents, including the prospectus or offering memorandum, key investor information documents (KIIDs) and subscription forms. These documents explain the fund’s investment objectives, risks, fees and conditions for potential investors.
  • The trustee company to set up the vehicle that will handle the day-to-day operations of the fund, including accounting, valuation and reporting, playing a key role in ensuring compliance with regulatory requirements.
  •  the custodian to safeguard the fund’s assets and monitor compliance with regulatory requirements. The custodian acts independently to protect investors’ interests.
  • The management company to which the investment management, financial and operational risk control and administration and distribution activities will be delegated.
  •  The fund admin company (TA and CA) responsible for day-to-day fund management, including accounting, calculation of unit values, regulatory compliance and investor relations. 

It is important to note that setting up a fund, particularly in a highly regulated jurisdiction such as Luxembourg, involves several legal, regulatory and operational considerations. Aeffe Capital S.A. will coordinate the various service providers with whom it has worked for several years and who will be involved in the creation of the fund.

Luxembourg funds are frequently used in private equity transactions for several reasons:

  1. Flexible structures: Luxembourg offers a wide range of investment vehicles, which offer great flexibility in structuring private equity transactions.
  2. Favourable regulation: Luxembourg has favourable financial regulation that makes its funds attractive to international investors. In addition, the country is known for its political and legal stability.
  3. Tax treaties: Luxembourg has signed numerous tax treaties with other countries, which can reduce the tax impact on private equity transactions, allowing for greater tax efficiency.
  4. Legal structure: Luxembourg’s legal structure offers a high level of investor protection, reducing the risk associated with private equity transactions.
  5. European market access: Luxembourg is in the heart of Europe and offers privileged access to the European single market, allowing investors to take advantage of investment opportunities throughout the EU.

For these reasons, Luxembourg funds are increasingly being used in private equity investments and offer promoters the possibility of fundraising with different investors, offering fund enhancement and ensuring tax neutrality within the vehicle for realised capital gains. Investors can diversify their portfolios and pursue high returns, albeit at higher risk. 

Aeffe Capital is available to organise an exploratory call to identify the vehicle that best suits your needs.