Required service providers for Luxembourg funds

Required service providers for Luxembourg funds

Management companies

All Luxembourg FCPs must, and SICAVs, if they so desire, may, be managed by a management company.

UCITS management companies

One of the major novelties of UCITS IV is the ability for management companies to set up and run funds in another EU State than their own. In order to qualify as an admissible UCITS management company and hence be able to “remotely” manage foreign funds, entities in Luxembourg must fulfil strict conditions, described in Chapter 15 of the Fund Law as well as in CSSF Regulation n.10-4, in terms of activity scope, organisation and functioning.

The activities of UCITS management companies are the “collective portfolio management” (“CPM”) of UCITS funds, this function encompassing asset management, administration and marketing. They may however also manage other types of Luxembourg UCIs, like Part II funds and SIFs. Management companies may also manage individual portfolios on a discretionary basis for private clients or pension funds. If they do so, they can also provide investment advice and perform safekeeping of UCI shares or units. This extended scope of activity will trigger the application of certain organisational and conflicts of interest rules taken from the financial legislation as modified by MiFID. In addition, the capitalisation requirements will change, compared to a management company limiting itself to CPM, if it performs the investment service of individual portfolio management.

Unlike before, where only UCITS management companies with an extended scope of activity had to function in accordance with MiFID standards, current rules impose that the highest standards in terms of organisation and procedures, conflict of interest rules, compliance with rules of conduct and risk management apply to all UCITS management companies.

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