Hedge Funds / Funds of Hedge Funds in Luxembourg

As at 30 June 2011, alternative investment funds represent roughly EUR 143 billion (USD 207 bn), or 7% of the total assets under management in Luxembourg. This figure includes all products serviced from all jurisdictions and administered in Luxembourg (Source: ALFI).

In Luxembourg, the appetite for alternative investment strategies continues to be strong. Currently, there are 122 Hedge Funds and 72 offshore Hedge Funds domiciled and/or administered in Luxembourg corresponding to EUR 35,454 million (USD 51,241 m), and EUR 35,418 million
(USD 51,190 m), respectively, of assets under administration.

Similarly, there are 224 Funds of Hedge Funds and 285 offshore Funds of Hedge Funds domiciled and/or administered in Luxembourg corresponding to EUR 46,671 million (USD 67,453 m) and
EUR 25,371 million (USD 36,668 m), respectively, of assets under administration.

Regulatory background

The choice of a Hedge Fund vehicle will depend on the type of funding that needs to be raised, the proposed investor base, the type of investments to be made and any specific tax considerations. Luxembourg offers a choice of both regulated and non-regulated structures that meet the different requirements of Hedge Fund players.

Sponsors who want to establish a regulated Hedge Fund vehicle in Luxembourg can choose between three different options, each addressing specific needs:

  • Undertaking for Collective Investment in Transferable Securities (UCITS) under part I of the 2002 Law (also known as "UCITS III Sophisticated Funds"), whose securities are distributed to the public; or
  • Undertaking for Collective Investment (UCIs) under part II of the 2002 Law, allowing broader investment strategies; or
  • Specialised Investment Fund (SIF), i.e. UCI's reserving their securities to well-informed investors.

The regulatory regime is flexible enough in order to pursue all types of hedge fund strategies. Many hedge fund leading names have launched new UCITS funds which make them in a regulatory par with more traditional and accessible European vehicles and at the same time benefiting from the European passport. Other hedge fund asset managers have launched new onshore funds using the more lightly regulated route of the SIF. SIFs confirm Luxembourg's role as alternative fund domicile.

When launching a Luxembourg-based Fund, the CSSF is willing to consider specific new strategies provided that the risk spreading principle is applied and reflected in the prospectus through the disclosure of investment restrictions. Such products do not benefit from the "European Passport".

How PwC Luxembourg can help you

With the help of our highly qualified and experienced professionals in Luxembourg and the network of fund specialists throughout the world, PwC offers:

  • Assistance with the set-up and establishment of Hedge Funds through regulatory, tax and operational advices, the optimisation of fund and management company tax set-up, advices in local and cross-border outsourcing and regarding fund consolidation;
  • Assurance of Hedge Funds through statutory audits and long form reports, SAS 70 and GIPS certification;
  • Performance improvement advisory to the fund, compliance and AML system selection and implementation, benchmark and cost optimisation, financial risk management, research, and training through our dedicated entity, PwC's Academy.

Our Hedge Funds Leadership Team