Luxembourg is the top investment destination for foreign businessmen interested in performing investment activities in Europe. The legislative framework applicable in this jurisdiction provides a wide range of investment funds, addressed to all the available categories of investors. The procedure on how to start an investment fund may depend on its characteristics, the level of investment, and other similar conditions.
Laws governing the types of investment funds in Luxembourg
Here is the legislation that covers the main types of Luxembourg investment funds:
- the SIF Law of February 2007 that applies to Specialized Investment Funds;
- the SICAR Law of June 2004 that applies to Special Interest Capital Investment Companies;
- the RAIF Law of July 2016 that covers Reserved Alternative Investment Funds;
- the 1915 Company Law that applies to corporate entities is used to create investment funds in the Grand Duchy.
When seeking information on how to start an investment fund in Luxembourg or any other jurisdiction, you can find useful information on some of the most appealing countries in our magazine. Among them, we recommend the Cayman Islands, where the Cayman SPC is often used to set up various types of funds.
Undertakings for collective investments in Luxembourg
The investment funds in Luxembourg that can be set up as undertakings for collective investments (UCIs) can be registered under two main categories:
• undertakings for collective investments in transferable securities (UCITS);
• alternative investment funds (AIFs).
The UCITS vehicles are registered in Luxembourg following the European Union’s Directives, while the AIFs can cover a wide range of investment funds. Investors who are interested in hedge fund startup in Luxembourg can register the entity as an AIF.
AIFs can take the following forms:
• hedge funds;
• real estate investment funds;
• venture capital funds;
• private equitdy funds.
You may learn more about the Cayman Islands segregated portfolio company in our magazine. The ability to employ distinct portfolios, which is particularly helpful for investments that can use different cells to hold their clients’ assets, is its key feature. Contact our Cayman Islands specialists for further information.
Legal entities for UCIs in Luxembourg
The procedure on how to start a hedge fund in Luxembourg registered as an UCI begins by choosing a legal entity. Funds established as UCITS can be set up as one of the following:
• common investment fund (FCP);
• investment company with variable capital (SICAV);
• investment company with fixed capital (SICAR).
An advantage of registering these types of funds refers to the fact that they are allowed to perform several investment strategies at the same time, by establishing compartments within the fund.
Specialized investment funds in Luxembourg
Another type of fund which can be registered in Luxembourg is the specialized investment fund (SIF), addressed to professional and institutional investors, who have an extensive knowledge in the field.
The minimum capital participation is established at EUR 125,000, and one of the advantages of this structure is given by the fact that there are fewer regulations, thus providing more flexibility for investment purposes.
The legislative framework available in Luxembourg offers other types of investment funds, such as the investment company in risk capital (SICAR).
The Special Interest Capital Investment Company in Luxembourg
The SICAR can be used to create investment funds that invest in high-risk assets. These structures address qualified investors who can understand and accept the risks of such investments. They can be used to invest in:
- private equity;
- venture capital.
The main advantage of the SICAR is the high potential income that can be obtained from these types of investments. Also, this type of investment fund in Luxembourg is exempt from the subscription tax.
The Reserved Alternative Investment Fund in Luxembourg
The Reserved Alternative Investment Fund, or RAIF, was enabled under the Luxembourg legislation in 2016, and it is a combination of SIFs and SICARs. Its main advantage is that it does not require authorization from CSSF. As such, the RAIF can be created and launched in about 6 weeks.
In order to start an investment fund under the form of an RAIF in Luxembourg, the following conditions must be met:
- it must be created as an AIF, in accordance with the Luxembourg legislation;
- it must have an external Alternative Investment Fund Manager;
- it can sell its products to informed investors only;
- it must have a diversified investment policy or have high-risk assets in its portfolio.
From a taxation point of view, the Luxembourg RAIF must pay an annual subscription tax of 0.01% of its net asset value. However, when investing in high-risk assets only, the RAIF may use the SICAR tax regime, which provides for tax exemptions, including from the subscription levy.
Value of assets managed by investment funds in Luxembourg
According to the latest data gathered by the Luxembourg National Bank, CSSF, and the Association of the Fund Industry, by May 2025:
- the number of assets administered by domestic funds was worth EUR 7.419 billion;
- out of these, EUR 4.767 billion worth of assets were under the management of UCITS funds;
- AIFs managed assets with a total value of EUR 2.652 billion.
Please contact our team of affiliates in Luxembourg for a detailed presentation on this matter.