Luxembourg is a leading European hub for alternative investment funds (AIFs), offering flexible legal structures, investor-friendly tax regimes, and a strong regulatory framework. AIFs in Luxembourg digital asset fund setup are particularly popular among fund managers targeting private equity, real estate, hedge funds, infrastructure, and digital assets.
What is an Alternative Investment Fund?
An Alternative Investment Fund (AIF) is a collective investment vehicle that does not qualify as a UCITS (Undertaking for Collective Investment in Transferable Securities). AIFs are primarily intended for professional and institutional investors and are regulated under the EU Alternative Investment Fund Managers Directive (AIFMD).
Key Luxembourg AIF Structures
Luxembourg offers several fund structures that qualify as AIFs:
1. Reserved Alternative Investment Fund (RAIF)
- Does not require direct approval from the CSSF (Luxembourg’s regulator)
- Must appoint an authorized AIFM
- Offers quick time-to-market and flexibility
- Suitable for a wide range of alternative assets
2. Specialised Investment Fund (SIF)
- Supervised by the CSSF
- Tailored for well-informed investors
- Allows a broad investment scope, including hedge funds, real estate, private equity, and crypto
3. Investment Company in Risk Capital (SICAR)
- Ideal for private equity and venture capital
- Regulated by the CSSF
- Offers tax advantages specific to capital gains
4. Partnership Structures (SCSp / SCS)
- Offer maximum flexibility and full contractual freedom
- Often used for private equity and real assets
- Tax transparent and do not require regulatory approval unless managed by an AIFM
Role of the AIFM
An Alternative Investment Fund Manager (AIFM) is mandatory for most Luxembourg AIFs. The AIFM can be:
- An external manager (Luxembourg-based or EU-based)
- A registered or authorized AIFM depending on the fund’s assets under management
An authorized AIFM provides EU-wide passporting rights, allowing the fund to be marketed across the EU to professional investors.
Advantages of Luxembourg AIFs
- Regulatory credibility: CSSF oversight or indirect regulation through the AIFM
- EU passporting: Market the fund throughout the EU under AIFMD
- Tax efficiency: No corporate tax for most AIFs (RAIFs, SIFs), low subscription tax (0.01%)
- Flexible structuring: Umbrella funds, multiple share classes, and open/closed-ended models
- Reputation: Luxembourg is the 2nd largest fund domicile in the world
Conclusion
A Luxembourg alternative investment fund offers fund managers a flexible, tax-efficient, and globally respected framework to launch and manage sophisticated investment strategies. Whether for private equity, real estate, hedge funds, or digital assets, Luxembourg AIFs provide a powerful gateway into the European investment market.