Answer ... Luxembourg offers a wide range of legal structuring tools which may address the requirements and specificities of different projects.
The choice of structure will largely depend on a combination of several factors, including:
- the investment strategy;
- the assets;
- the size of the alternative investment fund (AIF);
- the profile and location of the investors;
- the time to market;
- the level of regulation needed;
- cost efficiency; and
- tax considerations.
While a tailored approach will always be preferred over a ‘one size fits all’ approach, some general trends may be observed.
Managers targeting a lower level of assets under management with minimum regulatory obligations may consider setting up a non-regulated AIF in the form of a Luxembourg special or common limited partnership and appointing a registered AIFM, thus eliminating the costs and regulatory burden associated with the appointment of an authorised AIFM and depositary. The special limited partnership is an efficient launch pad, as it is quick to set up and well suited for projects requiring contractual flexibility and cost efficiency. The major drawback is the absence of a marketing passport and the impossibility of setting up an umbrella structure with segregated compartments.
Should the targeted level of assets under management exceed the thresholds set out in Article 3(2) of the AIFM Law, it may be worth considering a reserved alternative investment fund, which may be structured as an umbrella fund. Although an authorised AIFM will have to be appointed, it will make the EU marketing passport available to market the fund to professional investors across the European Union, thus turning costs into additional opportunities.