Equiom: A guide to the Luxembourg fund industry
Welcome to our first article in the Equiom Guides series, designed to help you understand key topics affecting the sectors in which we operate.
Luxembourg is known for its rapid development and ability to hold the competitive edge in the fund industry. In this article, we talk about Luxembourg and what makes it the leading investment fund centre in Europe.
The fund industry in Luxembourg was born with the introduction, in the mid-1980s, of the so called Undertakings for the Collective Investment in Transferable Securities (UCITS) Directive, initiated to offer greater protection to small investors.
Luxembourg, one of the early adopters of the directive, has continued to develop over the years and it is today the second largest fund centre around the world, offering a full range of investment vehicles for both UCITS and alternative investment funds (AIFs).
The economic, social and political stability of the country has allowed it to establish a strong legal and tax framework.
With the introduction of the Alternative Investment Fund Managers Directive (AIFMD), Luxembourg saw a new phase of expansion creating new business opportunities with an innovative framework for all types of investment vehicles and products, both for institutional investors and family groups.
Luxembourg offers flexible product solutions - regulated, indirectly regulated and unregulated fund structure options together with an efficient tax environment. It has double taxation treaties with more than 60 countries thus allowing for tax efficient product solutions. Luxembourg also has a strong track record in alternative investment products and bespoke investment structures such as hedge funds and funds of hedge funds, private equity (PE) vehicles and real estate funds.
For private equity, Luxembourg’s limited partnership (Société en Commandite Spéciale or SCSp) structures have proven very popular. Luxembourg has seen a 20 percent increase year on year in private equity assets with sustained interest from PE, real estate and venture capital managers around the globe.
Considered the ‘Gateway to Europe’, Luxembourg has a business-oriented infrastructure combined with solid banking and political stability.
As a key player in the global financial industry with a wide range of experienced and specialised service providers, Luxembourg is on the OECD ‘white list’ making it a very reliable and transparent jurisdiction.
In summary, Luxembourg is the perfect place for alternative investment funds. With its competitive edge over other jurisdictions and its ability to adapt quickly to changes in the market, Luxembourg’s status as a leading investment fund provider is set to continue.
