The rise of actively managed ETFs (Exchange-traded funds) is reshaping the investment landscape, offering a hybrid solution that combines the flexibility of active management with the tradability and cost-efficiency of ETFs. As demand grows, asset managers must explore optimal structures to launch and manage these funds efficiently. One compelling option is the Luxembourg Special Limited Partnership (SCSp), a versatile vehicle that provides tax efficiency, regulatory flexibility, and operational advantages for active ETF strategies.
The Growing Appeal of Active ETFs
Unlike passive ETFs that track an index, actively managed ETFs rely on portfolio managers to make strategic investment decisions, aiming to outperform benchmarks through security selection and tactical asset allocation. Key benefits include:
- Enhanced flexibility – Managers can adjust exposures based on market conditions.
- Improved liquidity and transparency – Investors benefit from intraday tradability and regular portfolio disclosures.
- Cost advantages – Active ETFs often have lower expense ratios than traditional mutual funds.
The market is expanding rapidly. According to Morningstar, actively managed equity ETFs grew 48% organically in 2023, with the US and Ireland leading inflows. As investor preferences shift toward transparent, liquid, and cost-efficient solutions, asset managers must adapt—and Luxembourg’s SCSp offers a compelling framework.
Why Luxembourg’s SLP (Société en commandite spéciale or “SCSp”) is Ideal for Active ETFs
The Luxembourg Special Limited Partnership (SLP or French SCSp) is a tax-neutral, flexible structure that allows asset managers to efficiently set up and operate active ETFs (Exchange-traded funds). Key advantages include:
1. Tax Efficiency
- No subscription tax for active ETFs – Since January 2025, Luxembourg has abolished the subscription tax for actively managed ETFs, removing a cost barrier and making it more competitive compared to passive ETFs.
- No corporate income tax – The SCSp is tax-transparent, meaning profits are taxed at the investor level rather than the fund level, optimizing after-tax returns.
2. Regulatory Flexibility
- UCITS-compliant ETF share classes – Luxembourg allows dual-share class structures, meaning a single UCITS fund can issue both ETF and traditional shares, reducing operational complexity.
- Monthly (not daily) portfolio disclosures – Unlike some jurisdictions requiring daily transparency, Luxembourg permits monthly disclosures with a one-month lag, protecting active strategies from front-running.
3. Operational Advantages
- Seamless conversion from traditional funds to ETFs – Existing Luxembourg funds can be converted into ETFs, allowing asset managers to repurpose successful strategies without launching new vehicles.
- Access to global distribution networks – Luxembourg’s well-established fund passporting regime enables cross-border distribution across Europe and beyond.
Strategic Considerations for Asset Managers
While the SLP (SCSp) provides a robust framework, asset managers must consider:
- Balancing active and passive strategies – ETFs may cannibalize traditional fund flows, but they also attract new investors seeking liquidity and transparency.
- Fee compression – Active ETFs typically charge lower fees than mutual funds, requiring managers to optimize cost structures.
- Performance differentiation – Since active ETFs disclose holdings periodically, managers must ensure their strategies generate alpha consistently to justify fees.
Conclusion: Luxembourg as a Hub for Active ETF Innovation
The Luxembourg SLP (SCSp) is an ideal vehicle for asset managers looking to capitalize on the active ETF boom. With its tax advantages, regulatory flexibility, and operational efficiencies, Luxembourg provides a competitive edge in a rapidly evolving market.
For asset managers, the key is to act swiftly—leveraging Luxembourg’s favorable regime to launch or convert active ETFs before competitors dominate the space. As investor demand grows, those who embrace this structure will be well-positioned to capture flows and deliver outperformance in an increasingly dynamic ETF landscape.
Damalion supports investors who want to structure their investments throughout Luxembourg. To benefit from the Luxembourg Special Limited Partnership, please contact your Damalion expert now.
This communication is for informative purpose only. Damalion focused on advising families for wealth preservation by identifying opportunities and challenges.
