Alternative Investment Fund Managers (AIFM) in LuxembourgUpdated on Thursday 25th February 2021
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The Alternative Investment Fund Manager (AIF) refers to the entity that is entitled to manage the assets and the investment schemes of alternative investment funds (AIFs). In Luxembourg, the AIFM Law entered into force on 15th of July 2013, as a transposition of the European Union’s Alternative Investment Fund Manager Directive (AIFMD).
The law on AIFM in Luxembourg applies to a wide range of funds that can be included in the AIFs category, such as hedge funds or real estate funds, but other types of investment vehicles, such as certain categories of collective investment funds. Local and foreign investors who want to open a fund in Luxembourg that falls under the AIFMD regulation can receive in-depth information on the registration process from our team of financial advisors.
What are the responsibilities of an AIFM in Luxembourg?
The AIFM in Luxembourg is represents by a person who has an in-depth knowledge of the financial sector, laws and regulations, and who is able to provide management services that will increase the value of an investment vehicle. The AIFM has multiple responsibilities and this is why the entity must be approved by the Financial Sector Supervisory Commission (CSSF), the entity which supervises all types of vehicles, including the SICAV in Luxembourg.
The main activities of an AIFM in Luxembourg refers to developing portfolio management services and risk management services. Besides these, the responsibilities of a manager can refer to marketing or administrative activities. Depending on the qualifications of the person, the AIFM can also be entitled to offer investment advice to his or her clients or safekeeping the assets of the fund.
It is also important to know that the AIFM in Luxembourg has to work under a legal entity; in the case in which the AIFM will hire additional staff, the respective employees must have a satisfactory level of skills and education. Businessmen interested in opening a Luxembourg fund must know that when they appoint an AIFM, the AIFM can outsource his or her activities to an entitled party, by sending a notification to the CSSF through which the AIFM will explain how this action will be in the best interest of the investors.
AIFM in Luxembourg and AIFs – a growing industry
The AIF sector in Luxembourg is represented by a diversified market, as there are numerous types of funds created for the purpose of investing in different market sectors and having different investment strategies. Even so, the industry of AIFs has been flourishing in the last years and the demand of management companies operating as AIFM in Luxembourg has also increased.
Businessmen who want to open an investment fund in Luxembourg should take into consideration the following aspects if they want to invest in a fund that is regulated under the AIF laws (our team of financial specialists can offer an in-depth presentation on all the options investors have in this sense):
- in 2019, the assets under management held by management companies increased by 17% (this also takes into consideration the assets held by AIFM in Luxembourg);
- in 2019, CSSF approved 17 new management companies and all of them had an AIFM license;
- from all the entities allowed to operate as an AIFM in Luxembourg, 64% manage the assets of at least one Reserved Alternative Investment Fund (RAIF), one of the most popular AIFs that can be set up here;
- the number of RAIFs operating as real estate funds increased from 2018 to 2019 by 133%;
- most of the AIFs generally prefer to invest in a single industry – more exactly, 67% of them.
How does an AIFM in Luxembourg obtain a license?
As said earlier, the AIFM will need to obtain a license from the CSSF in order to carry management activities in this country. When applying for a license, the future AIFM in Luxembourg will have to complete a set of standard forms required by the institution and specific documents regarding the previous financial activity and financial education will also have to be added to the file.
Please be aware that some AIFMs will require obtain an authorization from the CSSF, while others will only need to register with the institution, and you can find out more information from our team of financial consultants. Once authorized or registered with the CSSF, the AIFM will have specific obligations towards this institution.
The manager will need to provide information on the management structure of the company, any modifications brough to this structure or the any other changes (registered address, name of the AIFM in Luxembourg, shareholding, etc.). For more details on this subject, as well as for legal advice on how to open a Luxembourg fund, please contact our team of specialists.