Luxembourg Undertakings for Collective Investment: Legal Regime And Characteristics In Brief – Securities

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TYPES OF COLLECTIVE INVESTMENT VEHICLES AVAILABLE IN LUXEMBOURG

UCITS

refers to Undertakings for Collective Investment in Transferable Securities and refers to investment funds which have been incorporated in accordance with the provisions of the amended Luxembourg law of 17 December 2010 transposing European Directive 2009/65/EC (“UCI Law”). UCITS benefit from a European passport in the sense that once approved by the Luxembourg supervisory authority, they can, according to a standardized notification procedure, be marketed to the public in all other EU Member States. UCITS also benefit from ease of registration 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 retail investors with whom UCITS may be marketed, UCITS are subject to specific rules regarding the assets in which they may invest and the diversification and concentration rules with which they must comply. These aim to ensure appropriate liquidity of the investment portfolio of the UCITS allowing investors to redeem their units at least twice a month.

PART II FUNDS

means undertakings for collective investment governed by Part II of the UCI Law, which do not qualify 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 passport1under certain conditions. They are subject to the permanent supervision of the Luxembourg supervisory authority (“CSSF”). Yet they have greater flexibility in terms of the type of assets they can invest in, the investment strategies they can employ, the diversification rules they are subject to and the liquidity they offer investors. .

FIS

means the Specialized Investment Funds organized under the amended Luxembourg law of 13 February 2007 (“FIS law“). SIFs are reserved for so-called informed investors, i.e. in essence institutional investors, professional investors and investors subscribing a minimum of EUR 125,000. They are subject to the permanent supervision of the CSSF. Due to the sophistication of their investors, they benefit from a fairly flexible regime: among other things, SIFs must invest in accordance with the principles of risk spreading but also have complete flexibility as to the type of assets in they invest and the strategies they employ Fund II, they will also benefit from the AIFMD passport under certain conditions.

SICAR

means risk capital investment companies governed by the amended Luxembourg law of 15 June 2004 (“SICAR lawSICARs operate under a regime tailored to private equity/venture capital investments, including tax treatment different from that applicable to UCITS, Part II funds and SIFs. SICARs are not required to operate according to the principle of risk They are reserved for well-informed investors and are subject to CSSF supervision in the same way as SIFs SICARs will also benefit, under certain conditions, from the AIFMD passport.

S.V.

means securitization vehicles organized under the amended Luxembourg law of 22 March 2004 relating to securitization (“Securitization Act 2004“). They can be used in certain circumstances as an alternative to the investment vehicles mentioned above or in addition to the investment structure, mainly 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, fall under the supervision of the CSSF SV will not be subject to the AIFMD regime when it is qualified as an “entity ad hoc securitization” as defined therein3

A new securitization regime that reflects the requirements of Regulation (EU) 2017/2402 on securitisations (“RS“) has applied since 1 January 2019. Three different securitization regimes are therefore available in Luxembourg: (i) the general SR regime for all securitizations that meet the criteria set out in the definition of securitization provided for in the SR , (ii) the specific regime SR regime provided for securitizations that qualify as simple, transparent and standardized (STS) securitizations under the SR, and (iii) the Luxembourg securitization regime for securitizations other than (i) and ( ii).

RAIF

means the Reserved Alternative Investment Funds governed by the Luxembourg law of July 23, 2016 (“RAIF law“). Its regime is based on the FIS regime with the important exception that the RAIF is not subject to CSSF approval or supervision as a product, which makes it an attractive vehicle on the other hand, the RAIF must designate an approved AIFM, thus benefiting from the AIFMD passport as well as the protection of the AIFMD framework.

LIMITED PARTNERSHIPS3

Limited partnerships designate a category of investment vehicles which are governed by the amended Luxembourg law of 10 August 1915 on commercial companies (“company law“). They are not supervised by the CSSF and can therefore be set up very quickly. These vehicles are used for their flexibility and are characterized by contractual freedom in their structuring, like the well-known Anglo-Saxon model of companies in Limited Partnerships also offer a competitive tax environment and can benefit from the AIFMD passport in certain circumstances. the SICAR law or the RAIF law The flexibilities offered by these legal forms (the main characteristics of which are detailed in the following tables) are also available for a limited partnership qualified as an FIS, SICAR or RAIF (as long as these sectoral laws do not do not specifically derogate from it).

UCITS AND FUNDS PART II

Legal texts concerning Undertakings for Collective Investment (OPC)

FIS

Memorandum: Specialized investment funds: Luxembourg regime for investment funds dedicated to well-informed investors

Legal texts concerning Specialized Investment Funds (SIF)

SICAR

For the record: SICAR: Luxembourg regime for investment funds investing in risk capital and dedicated to well-informed investors

Legal texts concerning the Investment Company in Risk Capital (SICAR)

AIFMD

Legal texts:

  • The Alternative Investment Fund Managers Directive and its implementation in Luxembourg

  • The law of 12 July 2013 relating to alternative investment fund managers

RAIF

Memorandum: Reserved Alternative Investment Funds: Luxembourg regime for investment funds not supervised by the Luxembourg regulator and dedicated to well-informed investors

Legal text: The law of 23 July 2016 relating to RAIFs

LIMITED PARTNERSHIP

Memorandum: Luxembourg partnerships

Legal text: The law of August 10, 1915 on commercial companies

Footnotes

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

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

3 “Société en commandite simple” means the société en commandite simple and the société en commandite simple.

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