Luxembourg stands as Europe’s leading jurisdiction for investment fund structuring. It combines strong investor protection, flexible legal frameworks, and a reputation for regulatory excellence. Whether you’re a private equity house, venture capital manager, real-estate investor, or wealth manager, setting up a Luxembourg fund offers a secure and tax-efficient route to global markets.
1. Choose a Fund Structure and Legal Form
Setting up a fund begins with choosing the right legal structure based on your target investors, strategy, and regulatory appetite. Luxembourg’s main fund categories include:
Reserved Alternative Investment Fund (RAIF)
A RAIF is an unregulated yet supervised vehicle reserved for well-informed investors. It allows rapid time-to-market, flexibility across asset classes, and can be structured as a SICAV, SCS, or SCSp.
- No prior CSSF approval required.
- Managed by an authorized Alternative Investment Fund Manager (AIFM).
- Minimum investment per investor: €125,000.
Undertakings for Collective Investment (UCI) Part II
The UCI Part II fund (including UCITS) is ideal for retail or institutional investors seeking diversification across assets. It operates under the 2010 Law and benefits from EU passporting when marketed through an authorized AIFM.
- Can invest in equities, bonds, or alternative assets.
- Requires CSSF approval and continuous supervision.
SICAV / SICAF
SICAV (variable capital) and SICAF (fixed capital) are corporate forms allowing open-ended or closed-ended strategies.
- Minimum capital: €1.25 million.
- Public or private limited liability company.
- Eligible for both UCITS and AIF structures.
FCP (Fonds Commun de Placement)
Fonds commun de placement is a contractual fund without legal personality, managed by a licensed management company.
- Best suited for managers seeking a non-corporate form.
- Requires CSSF approval and management oversight.
2. Meet Capital and Management Requirements
Minimum Capital
- RAIF: requires an external AIFM with its own capital adequacy under AIFMD.
- SICAV/SICAF: minimum subscribed capital of €1.25 million within 12 months.
- FCP: governed by the management company’s own capital rules.
- Investment firms: minimum €50,000 share capital when providing discretionary management.
Management Rules
A RAIF or regulated fund must appoint a fully authorized AIFM, domiciled either in Luxembourg or another EU member state. The AIFM oversees portfolio management, risk monitoring, and reporting.
An FCP, lacking legal personality, must be managed by a management company that acts in the investors’ collective interest.
3. Appoint Service Providers
The fund promoter must appoint qualified Luxembourg-based providers experienced in fund structuring:
- Depositary bank to hold assets and oversee transactions.
- Central administrator for NAV calculation, investor registry, and reporting.
- Auditor approved by the CSSF.
- Legal counsel to draft the fund documentation and coordinate filings.
- Tax advisor to ensure compliance with EU and double-tax treaties.
- Banking partner for capital contributions and payment flows.
These appointments are essential for regulatory acceptance and long-term governance.
4. Register with the CSSF
The Commission de Surveillance du Secteur Financier (CSSF) is Luxembourg’s financial regulator.
- RAIFs must be notified through their AIFM.
- UCI Part II, SICAV/SICAF, and FCP structures require direct CSSF authorization before launch.
- Annual reports and auditor statements must be submitted to maintain authorization.
Regulatory processing typically takes 1–2 months depending on fund complexity.
5. Market Your Fund
Once authorized, your fund can be distributed across the EU under the AIFMD passport or, for UCITS-like strategies, under the UCITS Directive.
Key Marketing Advantages
- Access to more than millions European investors.
- Ability to structure sub-funds within umbrella vehicles.
- Freedom to create feeder or master-feeder structures.
Funds can also be privately placed with professional investors globally through compliant regimes such as NPPR (National Private Placement Regimes).
6. Tax Advantages of Luxembourg Funds
Luxembourg’s tax neutrality is one of its biggest advantages:
- RAIF: generally tax-exempt except for an annual subscription tax of 0.01% of NAV.
- SICAV/SICAF: subject to the same 0.05% subscription tax, with exemptions for institutional compartments.
- FCP: transparent for tax purposes; income taxed only at investor level.
- Extensive double-tax treaty network covering over 80 jurisdictions.
- No withholding tax on dividends distributed to non-residents.
7. Common Sectors of Investments
Luxembourg investment funds cover a broad range of asset classes and sectors, reflecting investor diversification and risk appetite. The table below highlights the main sectors and their typical representation in Luxembourg fund portfolios based on market observations.
| Sector | Typical Fund Exposure (%) | Common Fund Types |
|---|---|---|
| Private Equity & Venture Capital | 30–35% | RAIF, SLP, SCSp |
| Real Estate & Infrastructure | 25–30% | RAIF, SICAV, SICAF |
| Renewable Energy & ESG Assets | 10–15% | RAIF, UCI Part II |
| Debt & Credit Strategies | 10–15% | FCP, RAIF, SICAV |
| Technology & Digital Assets | 5–10% | RAIF, SCSp, UCI Part II |
| Hedge & Multi-Strategy Funds | 5–8% | SICAV, FCP |
| Sustainable Finance & Impact Investing | 3–7% | RAIF, UCI Part II |
The majority of Luxembourg funds focus on private equity, real estate, and infrastructure, while emerging interest is growing in ESG, renewable energy, and digital asset funds. The RAIF structure remains the most frequently used vehicle across all asset classes due to its speed of setup and flexibility.
8. Governance and Compliance
Luxembourg emphasizes substance and ongoing compliance:
- Appoint a local conducting officer or board director resident in Luxembourg.
- Maintain proper AML/CFT procedures.
- Annual audited financial statements required.
- Periodic AIFMD reporting (Annex IV) for AIFs.
9. Why Choose Luxembourg
- Europe’s largest fund domicile, representing over €5 trillion AUM.
- Political stability and strong investor protection.
- Multilingual financial ecosystem (English, French, German).
- Access to experienced service providers.
- Proximity to EU institutions and cross-border tax certainty.
10. Launch Process Overview
- Select your legal form and structure (RAIF, UCI Part II, SICAV/SICAF, FCP).
- Draft offering memorandum and constitutive documents.
- Appoint AIFM, depositary, auditor, and administrator.
- File application or notification to CSSF.
- Open subscription accounts with a Luxembourg bank.
- Complete AML checks and investor onboarding.
- Begin capital raising and NAV reporting.
Frequently Asked Questions (FAQs)
- How long does it take to set up a Luxembourg fund?
Typically between 4 to 6 weeks depending on the structure and regulator feedback. - Can non-EU managers establish Luxembourg funds?
Yes. Non-EU managers can appoint an EU-authorized AIFM to market across Europe. - What is the minimum investment for a RAIF?
€125,000 per well-informed investor. - Is CSSF approval mandatory for RAIFs?
No, but the appointed AIFM must be CSSF-supervised. - What is the subscription tax?
A small annual tax of 0.01%–0.05% of net assets, depending on structure. - Are there tax exemptions?
Yes, institutional money-market, pension, or microfinance compartments may be exempt. - Can a RAIF issue different share classes?
Yes, with varying risk profiles and asset strategies. - Is local substance required?
Yes, at least one Luxembourg-resident director or conducting officer is recommended. - Can funds be listed?
Yes, on the Luxembourg Stock Exchange for transparency and liquidity. - What accounting standards apply?
Lux GAAP or IFRS, depending on investor base and strategy. - Can a fund invest globally?
Yes, Luxembourg funds can invest worldwide under AIFMD diversification limits. - Do funds need external valuation?
AIFs must have an independent valuation function or external valuer. - Can crypto or digital assets be included?
Permitted with prior CSSF approval and appropriate risk disclosures. - What language must documents be in?
English is accepted by CSSF, but French or German versions may be requested. - Can a fund migrate from another EU state?
Yes, through re-domiciliation mechanisms approved by CSSF. - Are umbrella funds allowed?
Yes, multiple sub-funds may operate under a single RAIF or SICAV. - How are dividends taxed to investors?
Generally exempt from Luxembourg withholding tax for non-residents. - Can the AIFM be external?
Yes, often appointed to manage multiple funds efficiently. - Who regulates management companies?
The CSSF under the 2013 AIFM Law and 2010 UCI Law. - Can I convert an existing company into a RAIF?
Yes, subject to AIFM appointment and investor notification.
Related Readings
- Pitch Your Startup: Series A, B, C & Growth Equity
- How to Form a Luxembourg SOPARFI Holding Company
- Luxembourg SCSp vs SCS: Understanding Partnership Structures
- RAIF vs SCSp: Key Differences for Investors
- Why Luxembourg is Europe’s Fund Hub
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Reviewed by: Damalion Fund Structuring Team
Specialists in Luxembourg RAIF, UCI Part II, SICAV/SICAF and FCP setup, banking coordination, and AIFM oversight Last reviewed: • Compliance: AIFMD, 2010 UCI Law |
Key takeaways
- Choose the right wrapper (RAIF, UCI Part II, SICAV/SICAF, FCP) based on target investors, strategy and supervision.
- Substance matters: AIFM, depositary, administration, audit, AML/CFT and governance must be in place.
- Tax neutrality tools include subscription tax regime and extensive treaty access (case-by-case).
Editorial standards
Content prepared by practitioners; legal and tax information is general and may change. For implementation, request a tailored opinion and client onboarding (KYC/AML) with our team.
Launch your Luxembourg fund with confidence
- Bank introductions and account opening coordination
- AIFM, depositary, administrator and auditor selection
- Documentation, CSSF process and investor onboarding
This article is for professional/institutional audiences. Nothing herein constitutes legal, tax, or investment advice.
10 Leading Banks in Luxembourg for Fund and Corporate Services
Luxembourg hosts a wide range of banking institutions supporting fund structuring, custody, and corporate banking services. Below are ten reputable banks frequently chosen by investment funds, family offices, and corporate entities for their expertise in cross-border operations and regulatory compliance.
- BGL BNP Paribas – Universal bank offering depositary and fund administration services.
- Banque Raiffeisen Luxembourg – Cooperative bank serving SMEs, funds, and private investors.
- ING Luxembourg – Provides corporate banking, fund finance, and custody solutions.
- Banque et Caisse d’Épargne de l’État (Spuerkeess) – State-owned bank supporting institutional and private clients.
- Deutsche Bank Luxembourg S.A. – Leading institution for fund depositary, financing, and investment banking services.
- CACEIS Bank, Luxembourg Branch – Specialist in asset servicing, depositary, and fund administration.
- J.P. Morgan Bank Luxembourg – Major custodian and service provider for alternative and UCITS funds.
- Société Générale Luxembourg – Offers fund banking, depository, and structured finance solutions.
- Northern Trust Luxembourg – Known for institutional custody, fund administration, and AIFM support.
- State Street Bank International GmbH, Luxembourg Branch – Global player in fund servicing and reporting infrastructure.
These institutions are integral to Luxembourg’s financial ecosystem, providing fund custody, administration, financing, and compliance support for private equity, real estate, and institutional investment structures.
