How to Start a Hedge Fund in Luxembourg

Updated on Thursday 04th May 2017

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Luxembourg is the top destination for investment purposes at a European level. Foreign investors interested in starting a hedge fund in Luxembourg should know that the first investment vehicle was incorporated in this country, which, at the moment, provides the most attractive investment legislation for the domiciliation of investment funds

What is a hedge fund in Luxemboug? 

A hedge fund in Luxembourg is a type of alternative investment fund in which the investors pool their financial capital with the purpose of conducting different investment strategies that will guarantee the highest return on investment. The procedure on how to start a fund in Luxembourg registered as a hedge vehicle stipulates that the investors will need to choose a legal entity to represent the respective structure. 

In Luxembourg, hedge funds can be set up as one of the following: 

•    public limited company; 
•    private limited company;
•    limited partnership. 

Characteristics of hedge funds in Luxembourg 

When starting a hedge fund in Luxembourg, the investors will benefit from the following characteristics for increasing the value of their business: 

•    carrying multiple investment strategies;
•    a flexible manner for developing the respective investment strategies;
•    using a management team to manage the financial assets of the hedge fund

Hedge funds registered in Luxembourg can set be set up following the regulations of the Commission de Surveillance du Secteur Financier (CSSF), the main supervisory institution for investment vehicles in this country. 

Another advantage related to the hedge funds startups in Luxembourg refers to the wide range of investment regimes under which such vehicles can be set up. 

Hedge funds can be set up as undertakings for collective investments (UCI), under the regulations of the Part II of the 2010 law. In 2007, the local authorities have enacted the specialized investment funds (SIF), addressed to institutional and qualified investors. 

More recently, the local authorities also created the reserved alternative investment fund (RAIF) structure, which does not require obtaining authorization from the CSSF

Businessmen are invited to contact our team of affiliates in Luxembourg for more details on the hedge funds structures available here.