Valsen Corporate

Luxembourg Alternative Investment Funds (AIF) Guidelines

Luxembourg Alternative Investment Funds (AIF)

AIF refers broadly to all funds outside the Undertaking for Collective Investment in Transferable Securities (UCITS) regime. This includes investment funds exposed to traditional mainstream strategies and, in some cases, funds available to retail investors.

Once approved in one EU Member State, an AIF can be distributed in all other EU Member States using the EU Product Passport (exactly like UCITS), as the AIFMD aims to replicate the UCITS success story for alternative investment fund.

Luxembourg Law of 13 February 2007 under Commission de Surveillance du Secteur Financier (CSSF), regulates the funds

AIFs: target investors

“Well-informed investors”, i.e.:

  • Institutional investors (e.g. banks, insurance companies, pension funds, etc.)
  • Professional investors (e.g. high-net-worth individuals)

Any other investor who:

  • confirms in writing that they fulfil the status of “well-informed investor”;
  • invests at least €125,000; OR
  • provides a bank confirmation (or similar).

Legal Requirements

Sr.

No

Element

Requirement(s)

Entity Requirements

The entity making the application is Luxembourg:

  1. Common Fund (FCP)
  2. Investment Company-variable capital (SICAV)
  3. Investment Company-fixed capital (SICAF)
  4. Limited Partnership

Director’s Requirements

The licensee will need at least 2 (two) natural person Fit and Proper Directors of any jurisdiction.

Shareholder requirements

The applicant will need at least one shareholder.

Fund Administrator

The Applicant must employ a Luxembourg licensed fund administrator or an approved Foreign Administrator

Fund Manager

  • All Luxembourg entities that manage AIFs (based in Luxembourg, in another EU country or outside the European Union) are subject to the AIFM Law and, must be:
  1. regulated and supervised by, or
  2. at least registered with, the CSSF.
  • Investment managers managing the portfolio of an AIF may be located abroad.

Depositary

  • The depositary must be located in Luxembourg.
  • Depositary must be a Luxembourg credit institution or a Luxembourg branch of a credit institution registered in another EU member state, or an investment frm if authorised by the CSSF, or a professional depositary of assets other than fnancial instruments under certain conditions

Luxembourg Office

  • Registered office and central administration of the AIF/AIFM must be located in Luxembourg to qualify as a Luxembourg-based AIF/AIFM.

Auditor

  • Audit of financial statements must be done by a Luxembourg independent approved statutory auditor with appropriate professional experience.

Minimum Capital Requirements

  • Minimum capital (net assets for an FCP) of

€1,250,000 to be reached within a period of 12 months following receipt of authorisation from the CSSF.

Ongoing Obligations

  1. If mentioned in the documentation, the AIFM must publish the net asset value (or make it available to investors). Any other publication must be made in compliance with the offering document.
  2. Luxembourg AIFMs are subject to transparency requirements towards investors and the CSSF, pursuant to the AIFM Law (e.g. information on conflicts of interest, liquidity risk, leverage, and remuneration policy).
  3. AIFs must communicate their annual reports to the CSSF and are subject to reporting requirements. AIFMs are subject to requirements towards the CSSF, notably on principal instruments, markets, exposures and concentrations in which they trade on behalf of the AIFs managed, details on the assets of the AIFs, including risk profiles, liquidity arrangements, overall level of leverage per AIF and acquisition by AIF of important holdings in non-listed companies.

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