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An increase in registration of investment funds in the Grand Duchy of Luxembourg is mainly attributable to the constant refinement of the country’s respective legislation. Recent years have also seen an explosive growth of fund-financing operations. 

So let’s take a closer look at what makes Luxembourg such a big hit with investors. 

Luxembourg: Setting up Investment Fund 

To establish an investment fund in Luxembourg, entrepreneurs normally choose the legal form of SOPARFI or one of the below AIF types:

  • SICAR;
  • SIF;
  • RAIF;
  • UCI.

The main piece of legislation governing purchasing & selling funds in Luxembourg is the AIF Act. Pursuant to the AIFMD, the EU is granted the authority to accept delegated assets for the purpose of clarifying their use & structure (both financial & legal).

How the AIFMD Affects Establishment of AIFs in Luxembourg

Establishing AIFs in Luxembourg is regulated by the AIFMD which determines whether AIFs should appoint AIF managers and what requirements depositaries must comply with. Pursuant to the AIFM Act, funds, irrespective of their type, are to appoint AIFM managers. 

A lighter AIF management regime is applied to:

  • funds total value of assets of which doesn’t exceed one hundred million euros;
  • funds total value of assets of which doesn’t exceed five hundred million euros (they don’t qualify for redemption for five yrs).

Using proper liquidity management systems & adopting procedures for controlling liquidity risks is required for each AIF. Doing so ensures that the liquidity profiles of AIFs’ investments are consistent with their core liabilities. Registering an AIF in Luxembourg also requires running regular tests assessing an AIF’s liquidity risks.

Registration of AIFs in Luxembourg: Disclosing Information

Managers are required to provide regulators with info pertaining to the AIFs managed by them. In particular, they must provide info on:

  • financial leverage resulting from borrowing funds/securities;
  • how AIFs’ assets are used in leverage agreements.
  • assets managed (total amount);

Rights granted to AIFs with respect to capital commitments of investors & any claims filed against investors with respect to the said commitments are regulated by Luxembourg legislation.

How GDPR Affects AIFs’ Transactions

The processing & transfer of personal data in Luxembourg is regulated by GDPR. As far as financing of funds is concerned, special attention is paid to the way investors’ personal data  & liabilities are transferred to lenders. AIFs’ documentation includes special GDPR provisions regulating the way such information is transferred outside the EU & shared with creditors.

Need more information on AIF regulation in Luxembourg? Why not order a consultation on the registration of AIFs in Luxembourg with IQ Decision UK?