Luxembourg: an international hub for private equity
Luxembourg continues to attract an increasing number of PE fund vehicles, and is one of the jurisdictions that is seeing the most positive developments in the EU. As PE houses settle their AIFMD strategies, we are seeing a notable number of choices being made in favour of Luxembourg-domiciled products. Also, houses that were traditionally more focused on private equity fund of funds offerings are now tending to diversify towards more direct private equity, infrastructure and debt fund strategies. Here again, Luxembourg is getting very serious attention in the fund domicile selection process.
Thanks to its efficient tax and legal environment, Luxembourg has over many years become the preeminent jurisdiction for structuring PE funds and deals. Historically, Luxembourg’s PE expertise was built on the use of the "Société de participation financière" ("SOPARFI") as an acquisition vehicle in PE deals, allowing tax structuring, legal implementation, domiciliation and administration. However, it was the adoption in 2004 of the law on "Sociétés d'Investissement en Capital à Risque" ("SICARs") that really spurred the development of Luxembourg into a major hub for PE. For the first time, a fund vehicle specifically tailored to the needs of the private equity industry was available. The launch of the Specialised Investment Fund ("SIF") regulatory regime in 2007 was a further major positive step along the way to putting Luxembourg firmly on the map as the first-choice European jurisdiction for PE funds and structuring.
According to 2015 Monterey Insight data, the private equity funds industry (i.e. SICAR, SIF and UCI) has never been so important in Luxembourg both in term of numbers (around 740 subfunds) and in term of net asset value (estimated around EUR 66.5 bis). With an evolution of more than 30% of the net assets compared to 2013, Luxembourg has shown in 2014 again its capacity to position itself as a major private equity funds domicile in Europe and proves to be able to take a significant advantage of the new industry regulation (AIFMD). Being consistently alerted by the needs of the industry, recently confirmed by the success of the limited partnership products (SCS and SCSp), the marketplace is able to attract very important private equity players and there is no doubt that the country will continue to increase its attractiveness over the coming years.
PwC Luxembourg - our leading market position
Over the past decade, PE has become a core and substantial business within PwC Luxembourg's service offering. We move with, and actively support, the industry.
We have developed a team of highly sophisticated specialists. Over 220 partners and staff are now dedicated to PE within our audit, tax, compliance and advisory practices. This successful strategy has resulted in PwC Luxembourg being recognised as the leading PE industry service provider in Luxembourg.
According to 2015 Monterey Insight data, PwC Luxembourg remains the most important audit firm both in terms of number of mandates and of assets size. Over the course of 2014, PwC consolidated its leadership in the private equity funds industry with 36% of audit market shares as shown in the chart below.
Private Equity Funds (SICAR, SIF, Part II Funds) Market share in number of subfunds
(source: Monterey Insight 2015 as at 31 December 2014)
Vincent Lebrun, partner and Private Equity Leader at PwC Luxembourg, said:
"There is no doubt that Luxembourg can and will attract more Private Equity and Alternative Funds in the coming years. However, in order to make this happen and become the location of choice, we need to take on board points for improvement which are feedback to us and correct those as soon as we can. This is crucial if we want to continue to provide innovative, efficient and personalised solutions. Luxembourg as an innovative business friendly jurisdiction must make the most of its ability to react quickly!"