Luxembourg collective investment undertakings: legal regime and characteristics in brief – Finance and Banking

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Luxembourg: Luxembourg collective investment undertakings: legal regime and characteristics in brief

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TYPES OF COLLECTIVE INVESTMENT VEHICLES AVAILABLE IN LUXEMBOURG

UCITS

means Undertakings for Collective Investment in Transferable Securities and refers to investment funds which have been set up in accordance with the provisions of the amended Luxembourg law of December 17, 2010 transposing EU Directive 2009/65 / EC (“UCI Law”). UCITS benefit from a European passport insofar as, once authorized by the Luxembourg supervisory authority, they can, according to a standardized notification procedure, be sold to the public in all other EU Member States. UCITS also benefit from registration facilities with the authorities of many non-EU member states which recognize the UCITS label and the investor protection regime it entails. In order to protect the retail investors to whom UCITS may be marketed, UCITS are subject to specific rules concerning the assets in which they may invest and the diversification and concentration rules with which they must comply. These aim to ensure an appropriate liquidity of the investment portfolio of the UCITS allowing investors to redeem their units at least twice a month.

PART II FUND

refers to collective investment undertakings governed by Part II of the Law on UCIs, which are not qualified as UCITS either because of their investment policy or because of the rules applicable to the distribution of their units / shares . Although Part II funds can be sold to the public, they do not have access to the UCITS passport. They will however benefit from the AIFMD passport.1 under certain conditions. They are subject to the permanent supervision of the Luxembourg supervisory authority (“CSSF”). However, they have greater flexibility as to the type of assets in which they can invest, the investment strategies they can implement, the diversification rules to which they are subject and the liquidity they offer. to investors.

SIF

refers to the Specialized Investment Funds organized under the amended Luxembourg Law of 13 February 2007 (“SIF Law”). SIFs are reserved for so-called informed investors, ie essentially institutional investors, professional investors and investors subscribing for a minimum amount of 125,000 euros. They are subject to permanent control by the CSSF. Due to the sophistication of their investors, they benefit from a fairly flexible regime. Among other things, SIFs must invest according to the principles of risk spreading, but also have complete flexibility as to the type of assets in which they invest and the strategies they employ. Like Part II funds, they will also benefit from the AIFMD passport under certain conditions.

SICAR

means Venture Capital Investment Companies governed by the amended Luxembourg law of June 15, 2004 (“SICAR Law”). SICARs operate under a regime adapted to private equity / risk capital investments, including tax treatment different from that applicable to UCITS, Part II funds and SIFs. SICARs are not required to operate on the principle of risk spreading. They are reserved for informed investors and are subject to the control of the CSSF in the same way as the SIFs. SICARs will also benefit, under certain conditions, from the AIFMD passport.

SV

means Securitization vehicles organized under the amended Luxembourg law of 22 March 2004 on securitization (“2004 law on securitization”). They can be used in certain circumstances as an alternative to the investment vehicles mentioned above or in addition to the investment structure, in particular depending on the objectives of the operation and the way in which it is structured. Securitization vehicles can be offered to all types of investors, but those which issue securities to the public on a continuous basis come under the supervision of the CSSF. SV will not be subject to the AIFMD regime when it is qualified as “special purpose securitization entities” within the meaning of the latter.2 A new securitization regime reflecting the requirements of Regulation (EU) 2017/2402 on securitizations (“RS”) has applied since January 1, 2019. Three different securitization regimes are therefore available in Luxembourg: (i) the general regime RS for all securitizations that meet the criteria set out in the definition of securitization provided in the RS, (ii) the specific RS regime provided for securitizations classified as simple, transparent and standardized (STS) under the RS, and ( iii) the Luxembourg securitization regime for securitizations other than (i) and (ii).

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Footnotes

1 AIFMD passport means the EU passport introduced by Directive 2011/61 / EU on managers of alternative investment funds (“AIFMD”) for the marketing of alternative investment funds (“AIF”) to investors EU professionals, as implemented in Luxembourg Domestic laws.

2 Special purpose securitization entities are defined in Article 4 (a) of the AIFMD.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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