Fund Setup Luxembourg: Your Expert Guide to Launching a Fund in Europe’s Premier Investment Hub

Luxembourg has firmly established itself as a global center for investment funds, offering a sophisticated regulatory environment, investor-friendly tax regimes, and robust infrastructure. If you are considering establishing a fund in Europe, Luxembourg is the jurisdiction of choice, whether you're targeting retail, professional, or institutional investors.

Why Luxembourg? Strategic Location, Stability, and Regulatory Excellence

Luxembourg is the largest investment fund center in Europe and second-largest in the world after the United States. With over €5 trillion in assets under management and more than 4,000 funds domiciled, the country’s proven regulatory framework attracts fund managers, family offices, and institutional investors from around the world.

The Grand Duchy offers:

• EU passporting rights to market funds across Europe.

• Access to a skilled multilingual workforce.

• Strong financial ecosystem with banks, custodians, and auditors.

• A range of regulated and unregulated fund structures.

Key Fund Structures in Luxembourg

1. UCITS (Undertakings for Collective Investment in Transferable Securities)

UCITS are highly regulated open-ended retail funds that benefit from passporting across the EU. They are ideal for managers targeting retail and institutional investors in Europe.

Key features:

• Supervised by CSSF (Commission de Surveillance du Secteur Financier)

• Strict risk diversification and liquidity rules

• Eligible to invest in transferable securities, bonds, ETFs, derivatives, etc.

• Must appoint a Luxembourg depositary, administrator, and auditor

2. SIF (Specialised Investment Fund)

SIFs are tailored for well-informed investors seeking flexibility in strategy. This structure is ideal for hedge funds, private equity, infrastructure, and real estate investments.

Advantages:

• Light regulatory touch under CSSF supervision

• Broad investment policy options

• Minimum subscription of €125,000 per investor

• Can be set up as an umbrella fund with multiple compartments

3. RAIF (Reserved Alternative Investment Fund)

RAIFs have gained popularity for combining the flexibility of unregulated funds with the safety of indirect supervision through an authorised AIFM (Alternative Investment Fund Manager).

Highlights:

• No direct CSSF approval required, ensuring faster time-to-market

• Must be managed by an EU-authorised AIFM

• Eligible for umbrella structure and a wide range of asset classes

• Suitable for professional and well-informed investors

4. SICAR (Investment Company in Risk Capital)

SICARs are designed specifically for private equity and venture capital investments.

Characteristics:

• Available only to well-informed investors

• Investments must qualify as risk capital

• No risk diversification requirements

• Can be structured as a corporation, partnership, or cooperative

Step-by-Step Guide to Setting Up a Fund in Luxembourg

Step 1: Choose the Appropriate Fund Structure

Selecting the right legal form is the foundation of your fund strategy. Consider your target investors, investment strategy, distribution goals, and required speed to market.

Popular legal forms include:

• Société Anonyme (SA)

• Société à Responsabilité Limitée (SARL)

• Société en Commandite Spéciale (SCSp) – especially for private equity funds

Step 2: Appoint Key Service Providers

Luxembourg funds must engage a number of essential partners:

• Management Company or AIFM: Can be based in Luxembourg or another EU jurisdiction

• Depositary Bank: Safeguards assets and performs oversight

• Fund Administrator: Handles NAV calculation, investor servicing, and reporting

• Auditor: Provides annual audit and ensures compliance

• Legal Advisor: Assists with documentation, regulatory filings, and structuring

Step 3: Draft Fund Documentation

Comprehensive documentation is critical for both compliance and investor transparency. Core documents include:

• Offering Memorandum / Prospectus

• Partnership Agreement (for SCSp)

• Constitutional Documents

• AIFMD compliance documents (if applicable)

All documents must comply with Luxembourg laws, CSSF regulations, and relevant EU directives (UCITS, AIFMD).

Step 4: Regulatory Notification or Approval

• UCITS and SIF require CSSF approval

• RAIF is registered post-launch by a notary and reported to the RAIF register under RCSL (Registre de Commerce et des Sociétés Luxembourg)

• SICAR also requires CSSF approval but offers faster processing than UCITS

The CSSF process generally involves submitting:

• Fund prospectus

• Service agreements

• Due diligence on directors and key persons

• Proof of sufficient substance in Luxembourg

Step 5: Fund Launch and Marketing

Once the fund is approved or registered:

• UCITS and AIFs can be passport-marketed across the EU using the UCITS or AIFMD marketing passport

• Marketing outside the EU depends on local private placement rules (NPPR)

• Finalize operational setup: bank account, investor onboarding, IT systems, etc.

Taxation Benefits of Luxembourg Funds

Luxembourg offers one of the most favorable tax regimes for investment funds in Europe:

• UCITS and SIFs are exempt from income and capital gains tax

• RAIFs structured as SCSps or SAs enjoy flexibility in taxation, with exemptions or SICAR-like benefits

• No withholding tax on distribution to non-resident investors

• Extensive double tax treaties with over 80 countries

• VAT exemptions for most fund services

Timeframe and Costs for Fund Setup

The timeline and cost vary depending on the structure:

Note: Capital must generally be fully paid within 12 months of fund launch.

Why Work with a Professional Fund Setup Advisor in Luxembourg

Setting up a fund in Luxembourg involves multiple regulatory, tax, and operational layers. Partnering with a seasoned advisor ensures:

• Speed to market with minimal delays

• Proper structuring aligned with legal and tax compliance

• Selection of the right legal vehicle and regulatory path

• Cost efficiency and avoidance of pitfalls

Contact Information

If you’re ready to start your Luxembourg fund setup, contact our expert advisory team today:

Phone: +971 23 567 9000
Email: fundsetup.net@gmail.com
Location: Luxembourg Office & UAE Office Support

Conclusion: Luxembourg Remains a World-Leading Fund Jurisdiction

From UCITS retail funds to institutional-grade RAIFs and private equity SICARs, Luxembourg offers a comprehensive ecosystem to support global fund promoters. Its stability, regulatory clarity, and tax efficiency continue to make it the gold standard for fund domiciliation in Europe.

Whether you're launching a hedge fund, real estate fund, debt fund, or ESG fund, Luxembourg provides the ideal jurisdiction to meet your investment ambitions.

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