Luxembourg digital asset fund setup is the largest investment fund center in Europe and the second-largest in the world after the United States. Its political stability, legal sophistication, and flexible fund structures make it a top choice for asset managers and investors worldwide. Setting up an investment fund in Luxembourg allows promoters to target global investors while benefiting from a strong regulatory framework and favorable tax conditions.
Step 1: Define the Fund Strategy and Target Investors
Before choosing the structure, determine:
- The type of assets (e.g., securities, private equity, real estate, crypto)
- The target investor base (retail, professional, or institutional)
- The regulatory and risk appetite of the sponsor
This will help determine the most suitable fund vehicle and regulatory approach.
Step 2: Choose the Appropriate Fund Structure
Luxembourg offers a wide range of fund vehicles. The most common include:
- UCITS (Undertakings for Collective Investment in Transferable Securities):
Highly regulated and suitable for retail investors. Ideal for traditional assets like stocks and bonds. - SIF (Specialised Investment Fund):
A regulated fund for institutional and professional investors. Offers investment flexibility and regulatory oversight. - RAIF (Reserved Alternative Investment Fund):
Does not require direct CSSF approval, but must appoint an authorized AIFM. Ideal for quick market entry and targeting professional investors. - SCSp (Special Limited Partnership):
Highly flexible and unregulated structure, often used for private equity and venture capital.
Step 3: Appoint Key Service Providers
Luxembourg investment funds must appoint qualified service providers, including:
- Fund Manager / AIFM (for AIFs)
- Depositary Bank (for safekeeping of assets)
- Administrator and Transfer Agent
- Auditor
- Legal Counsel
For regulated structures (UCITS, SIF), a CSSF license is required for the fund or its manager.
Step 4: Draft Legal Documentation
Key legal documents include:
- Fund prospectus or offering memorandum
- Articles of incorporation or limited partnership agreement
- Service agreements with custodians, administrators, and AIFMs
- Subscription documents for investors
Step 5: Regulatory Filing and Approval (if applicable)
For regulated funds (UCITS, SIF), submit the fund documentation to the CSSF for approval. For RAIFs and SCSp funds, CSSF approval is not required, but the AIFM must be authorized, and the fund must be registered with the Luxembourg Trade and Companies Register.
Step 6: Fund Launch and Marketing
Once the fund is approved or registered:
- Open the fund bank account
- Begin capital raising
- Distribute the fund to investors (passporting is available for UCITS and AIFs under EU rules)
Tax Benefits
Luxembourg funds benefit from:
- No corporate income tax at the fund level (for most vehicles)
- Low subscription tax (0.01% for SIFs and RAIFs)
- No withholding tax on distributions
- Extensive network of double tax treaties
Conclusion
Setting up an investment fund in Luxembourg is a strategic move for asset managers seeking regulatory certainty, global investor access, and a range of flexible fund structures. Whether launching a traditional UCITS or a specialized alternative fund like a RAIF or SCSp, Luxembourg offers the tools and infrastructure needed to succeed in global fund management.
