AIFMD IMPLEMENTATION:
Luxembourg was one of the first countries to transpose the Alternative Investment Fund Managers Directive (AIFMD) in July 2013. The regulation targets non-retail fund managers with operations across the EU and sets out a wide array of provisions regarding authorisation, operating conditions, reporting, supervision, and cross-border marketing of Alternative Investment Funds (AIFs).
Private equity funds are included within the scope of this regulation and its adoption was a significant growth factor for the PE industry, as Luxembourg-domiciled PE funds managed
by a licensed Alternative Investment Funds Manager (AIFM) are able to be passported throughout the EU. A legislative proposal containing amendments to the AIFM Directive was recently published for further discussions at the European Parliament and the EU Council. As of December 2021, the number of authorised AIFMs in Luxembourg totalled 261 entities, many of which are active in the PE space.
DIRECT REGULATION AND INDIRECT SUPERVISION :
Luxembourg offers a range of AIF vehicles which are directly regulated and subject to the prior authorisation and ongoing supervision of the CSSF. These are :
- The Société d’Investissement en Capital à Risque (SICAR)
- The Specialised Investment Fund (SIF)
- The “UCI Part II” fund
UNREGULATED STRUCTURES:
It is possible for Limited Partnerships (LPs) to be unregulated. Unregulated Luxembourg LPs are particularly interesting for smaller funds or first time funds which do not require an EU passport in the beginning.
In this case, the fund would need to appoint an external AIFM, either registered or authorised. Unregulated approaches include:
- Limited partnerships (SCS or SCSp)
- Holding vehicles
EU-WIDE ALTERNATIVE INVESTMENT REGULATIONS :
There are also pan-European regulations directly applicable across all EU member states, including Luxembourg. These regimes are particularly interesting for ‘registered’ AIFM, providing them with an EU passport to market alternative funds across Europe without the need to meet the ‘above-threshold’ requirements for authorisation as set out in the AIFMD.
However, in order to obtain a passport under these regimes, below-threshold AIFM are required to fulfil specific conditions regarding their investment policy, portfolio composition, diversification, and asset types.
