Private Equity

Private Equity
Private Equity Information Brief

Private Equity

Luxembourg: a prime location for structuring private equity

Luxembourg certainly 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 and flexible 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 SICAR has been a success - according to the Commission de Surveillance du Secteur Financier ("CSSF") (the Luxembourg financial regulator), in September 2013 the number of SICARs registered stood at 279. 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. CSSF figures for September 2013 recorded 1,543 SIFs, of which some 250 are PE funds.

With the transposition of the AIFMD Directive into Luxembourg law on 10 July 2013, Luxembourg took the opportunity to introduce several measures to increase further its attractiveness as a prime location for alternative funds. The new legislation saw the creation of a new Anglo-Saxon style of limited partnership form, the introduction of a very favourable tax regime for carried interest schemes, as well as the adaptation of current laws governing the different Luxembourg investment vehicles to comply with some AIFMD requirements.

The introduction of the new limited partnership vehicle, coupled with the fact that Luxembourg has one of the most extensive double tax treaties networks, shows that the Luxembourg government is, and will remain, highly committed to encouraging the private equity industry. Indeed, the new coalition government’s programme published in December 2013 explicitly refers to actions designed to attract the largest PE funds. We believe that this coherence is vital in distinguishing the Grand Duchy as a PE cluster.

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 200 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.

Publicly-available information* shows that PwC Luxembourg is the market leader for Private Equity fund (SIF, SICAR and Part II funds) audit work, both in terms of number of vehicles audited and in terms of asset under management of these vehicles. With a total market share of over 33% by number of funds audited (compared to a total combined share for the other "Big 4" auditing firms of almost 51 %) and 31% by assets under management (compared to a total combined share for the other "Big 4" of 55%) PwC Luxembourg easily demonstrates its leadership in the PE sector.

Figure 1:

Private Equity Funds (SICAR, SIF, Part II Funds)
Market share in number of subfunds

Private Equity Funds

Figure 2:

PE funds /audit market shares based on asset under management (EUR)

Private Equity Funds

*2014 Monterey data and available filed financial statements as at 31 December 2013

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