Hedge Funds / Funds of Hedge Funds in Luxembourg

Your current hedge fund challenges

Hedge funds and fund of hedge funds in Luxembourg account for EUR 136 billion in assets (USD 176 billion) in over 1,700 sub-funds. This includes all products serviced from all jurisdictions and administered in Luxembourg. Luxembourg is the second largest investment fund centre in the world after the United States. The financial sector is the largest contributor to the Luxembourg economy. Luxembourg is also an established European centre for hedge funds. Hedge funds are served by big players of the fund servicing world located in Luxembourg, including administrators, transfer agents, custodians, lawyers, auditors etc.

Luxembourg has developed a strong track record in alternative investment products and bespoke investment structures. Today, the majority of hedge funds set up in Luxembourg are structured as Special Investment Funds (SIF). The Luxembourg SIF is a well-established, regulated, operationally flexible and fiscally efficient multipurpose investment fund regime for an international, institutional and qualified investor base. The SIF has the characteristics and flexibility of typical hedge fund products while authorised and regulated by the Luxembourg authority CSSF and already meeting many of the pending regulatory standards being agreed at EU level, such as those in the AIFMD.

The asset management world is in the middle of major regulatory change and it is a testing time for the industry. Luxembourg has been adapting quickly to this new landscape as follows:

  • Luxembourg is keen to be one of the first jurisdiction to implement AIFMD into national law,
  • Luxembourg is introducing significant changes to its legal structures: a new special limited partnership regime (société en commandite spéciale) is being introduced. Moreover, the existing limited partnership regime (société en commandite simple) as well as the corporate partnership limited by shares (société en commandite par actions) are being modernized.

The bill transposing the directive and introducing these changes has been submitted to the Luxembourg Parliament on 24 August 2012 and is expected to pass before the end of the year.

These initiative demonstrates the willingness of Luxembourg to offer fund structuring solutions in line with international standards and respond to demand from investors and investment managers. We are confident that these efforts will further strengthen Luxembourg as an on-shore European alternative investment center.

How we can help

PwC is the leader in audits of funds investing in alternative asset classes (real estate, hedge funds and private equity) with a 40% market share in terms of asset under management and in Alternative UCITS with a 59% market share (source: Monterey 2011).

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

Fund set-up phase:

  • Market entry research for Asset Managers and service providers;
  • Assistance with the set-up and establishment of Hedge Funds through regulatory, tax and operational advices;
  • Optimisation of fund and management company tax set-up.

Day-to-day operations:

  • Audit services;
  • Assurance services through long form reports, SAS 70 and GIPS certification;
  • Advice on global distribution strategy and compliance with all regulation;
  • Assistance on compliance matters as well as risk management;
  • Performance improvement advisory to the fund and AML system selection and implementation, benchmark and cost optimisation;
  • Dedicated research and training through our dedicated entity, PwC's Academy.