Luxembourg is one of the world’s leading jurisdictions for establishing investment funds, known for its political stability, favorable regulatory environment, and strong legal framework. Whether targeting traditional assets or alternatives like private equity, real estate, or digital assets, setting up a Luxembourg digital asset fund setup investment fund provides access to global investors with attractive tax and compliance benefits.
Step 1: Define Fund Objectives and Target Investors
Before structuring the fund, clarify:
- Investment strategy: (e.g., equities, bonds, crypto, real estate)
- Target investors: (retail, professional, institutional)
- Level of regulation required
This helps determine the most appropriate fund vehicle.
Step 2: Choose the Fund Structure
Luxembourg offers various legal forms tailored to different strategies and investor types:
1. UCITS (Undertaking for Collective Investment in Transferable Securities)
- Highly regulated and suitable for retail investors
- Passportable across the EU
2. SIF (Specialised Investment Fund)
- For well-informed/institutional investors
- Broad investment flexibility
- Regulated by the CSSF
3. RAIF (Reserved Alternative Investment Fund)
- Not directly supervised by the CSSF
- Must appoint an authorized AIFM
- Quick to market, ideal for professional investors
4. SCSp (Special Limited Partnership)
- Unregulated, highly flexible
- Used for private equity, venture capital, and real estate
- Tax transparent
Step 3: Appoint Required Service Providers
Depending on the structure, appoint key entities:
- AIFM or Management Company
- Depositary Bank
- Fund Administrator
- Auditor
- Legal Advisor
A Luxembourg-based authorized AIFM is mandatory for most regulated funds.
Step 4: Draft Legal Documents
Key documentation includes:
- Fund prospectus or offering memorandum
- Articles of association / partnership agreement
- Service provider agreements
- Subscription documents
Step 5: Register and Obtain Regulatory Approvals
- UCITS & SIFs: Submit to the CSSF for approval
- RAIFs: Register with the Luxembourg Trade and Companies Register (RCS) via the AIFM
- SCSp: Set up by notarial deed or private agreement without CSSF involvement
Step 6: Fund Launch and Distribution
Once approved or registered:
- Open fund accounts
- Onboard investors
- Begin marketing across the EU (for UCITS/AIFs with passport rights)
Step 7: Ongoing Compliance and Reporting
- Regulatory reporting to the CSSF and/or ESMA
- Annual financial audits
- AML/KYC procedures
- Risk management and NAV reporting
Benefits of Setting Up in Luxembourg
- Globally recognized fund domicile
- Strong legal and regulatory infrastructure
- EU-wide distribution through passporting
- Attractive tax treatment (e.g., low subscription tax, no capital gains tax at fund level)
- Access to experienced fund service providers
Conclusion
Setting up a Luxembourg investment fund is a strategic decision for asset managers and sponsors looking to access global capital in a regulated, tax-efficient, and investor-friendly jurisdiction. With multiple fund structures available, Luxembourg provides the flexibility and infrastructure to support both traditional and alternative investment strategies.