Luxembourg stands as one of Europe’s premier destinations for setting up Alternative Investment Funds (AIFs), attracting global fund managers looking to launch private equity, hedge funds, real estate, infrastructure, or crypto-related vehicles. Backed by a stable political climate, sophisticated legal framework, and an investor-friendly tax regime, Luxembourg AIFs offer flexibility, regulatory certainty, and broad investment scope.
What Is an Alternative Investment Fund (AIF)?
An Alternative Investment Fund is a collective investment vehicle that falls outside the scope of UCITS (Undertakings for Collective Investment in Transferable Securities). AIFs are mainly designed for professional and well-informed investors and are governed by the EU Alternative Investment Fund Managers Directive (AIFMD).
Key AIF Structures in Luxembourg
Luxembourg offers several fund vehicles that can qualify as AIFs:
1. RAIF (Reserved Alternative Investment Fund)
- No direct CSSF approval required
- Must appoint an authorized AIFM
- Quick to launch and highly flexible
- Ideal for professional investors and alternative strategies
2. SIF (Specialised Investment Fund)
- Supervised by CSSF
- Broad investment powers, including high-risk assets
- Must meet diversification and risk-spreading rules
3. SICAR (Investment Company in Risk Capital)
- Tailored for private equity and venture capital
- Regulated by CSSF
- Suitable for high-risk, high-reward investments
4. SCSp / SCS (Limited Partnerships)
- Contractual freedom and tax transparency
- Can qualify as AIFs if managed by an AIFM
- Widely used in private equity and real estate
Role of the AIFM
Every Luxembourg AIF must appoint an Alternative Investment Fund Manager (AIFM), unless exempt under specific thresholds. An authorized AIFM provides:
- EU passporting rights for cross-border distribution
- Regulatory compliance with AIFMD
- Oversight of risk management, valuation, and reporting
Tax Advantages
- Most Luxembourg AIFs (RAIFs, SIFs) benefit from no corporate income or capital gains tax
- Low subscription tax (0.01% for SIFs and RAIFs)
- No withholding tax on profit distributions in most cases
- Access to Luxembourg’s double tax treaty network
Key Benefits of Luxembourg AIFs
- Flexible structuring for any asset class
- Fast time to market with vehicles like RAIF
- Reputable regulatory framework and investor protection
- Global appeal: accepted and recognized by institutional investors worldwide
- Ability to structure as umbrella funds with multiple compartments
Conclusion
A Luxembourg Alternative Investment Fund offers a powerful and versatile vehicle for fund sponsors and asset managers seeking a regulated yet flexible platform for alternative assets. With options like RAIF, SIF, SICAR, and SCSp, Luxembourg enables quick launches, global distribution, and robust legal and tax support — making it the go-to hub for sophisticated investment strategies.
