A Specialized Investment Fund (SIF) is a Luxembourg investment vehicle designed with well-informed investors in mind. It is a regulated structure under direct supervision of the Commission for the Supervision of the Financial Sector (CSSF).
Luxembourg specialized investment fund
Fund managers may establish a Specialized Investment Fund as an open or close-ended common investment fund (FCP) with no legal personality and under direct supervision by a fund manager, or an open or close-ended company with variable or fixed capital. Please feel free to contact your Damalion experts so we can help you to set up your Luxembourg SIF (Specialized Investment Fund).
Quick facts: Luxembourg Specialized Investment Fund (SIF) — legal forms, investor eligibility, CSSF authorisation, diversification rules and key tax points.
For initiators, asset managers, family offices, institutional investors and private clients • Damalion supports scoping, documentation and provider coordination. Regulatory approvals and investor acceptance remain at the discretion of authorities and counterparties.
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What is a Luxembourg Specialized Investment Fund (SIF)?
A Specialized Investment Fund (SIF) is a Luxembourg investment fund for well-informed investors. It is governed by the Luxembourg law of 13 February 2007 on specialised investment funds and is subject to authorisation and ongoing supervision by the CSSF. A SIF can invest in almost any asset class and is usually treated as an alternative investment fund (AIF) managed by an authorised AIFM, with access to the European marketing passport to well-informed investors.
Key regulatory features in one view
- Legal basis. Luxembourg law of 13 February 2007 on specialised investment funds, as amended.
- Eligible investors. Institutional investors, professional investors and other well-informed investors, including non-professional investors meeting the current legal conditions.
- Minimum commitment for some investors. For investors who are not institutional or professional investors, a minimum investment or commitment of EUR 100,000 normally applies under the well-informed investor rules.
- Authorisation and supervision. Prior authorisation by the CSSF and ongoing prudential supervision, including reporting and approval of key changes.
- Legal forms. Can be set up as a common fund (FCP) or as an investment company with variable (SICAV) or fixed capital (SICAF) in several company forms (for example SA, S.à r.l., SCA, SCS, SCSp).
- Diversification. Must respect the principle of risk spreading. As a general rule, no more than a set portion of assets should be invested in the same issuer, subject to limited exemptions.
- Minimum capital. Net assets must reach EUR 1,250,000 within 24 months after CSSF authorisation. Only a small portion must be paid in at subscription.
- Service providers. Luxembourg depositary, central administration and independent auditor are required. An authorised AIFM is required where the SIF falls within the full scope of the AIFM Directive.
- Tax framework. Generally exempt from corporate income tax and net wealth tax on its assets, but subject to Luxembourg subscription tax (taxe d’abonnement) at a standard rate of 0.01% per year on net assets, with specific exemptions for defined asset classes and strategies.
- Use cases. Often used for private equity, private debt, infrastructure, real estate, hedge funds and other alternative strategies aimed at well-informed investors.
SIF structure options at a glance
| Topic | Common fund (FCP) | Investment company (SICAV / SICAF) |
|---|---|---|
| Legal personality | No legal personality. Assets are jointly owned by investors and managed by a management company. | Has legal personality as a company under Luxembourg law. |
| Possible company forms | Not applicable. FCP is a contractual co-ownership structure. | Can be incorporated as SA, S.à r.l., SCA, SCS, SCSp or similar forms allowed by the SIF Law. |
| Governance | Managed by a management company. Investors hold units but do not vote as shareholders. | Managed by a board, general partner or managing body depending on the chosen form. Investors hold shares or partnership interests. |
| Capital structure | Typically variable capital with subscriptions and redemptions according to the rules of the fund. | Can be variable (SICAV) or fixed (SICAF) capital. Partly paid shares are possible subject to legal rules. |
| Umbrella option | FCP SIF can be structured with multiple sub-funds (compartments) with segregated assets and liabilities. | SICAV or SICAF SIF can be set up as an umbrella with separate sub-funds and share classes. |
| Typical use | Often used where a management company already exists and investors are familiar with contractual funds. | Often chosen for private equity, real estate, private credit and multi-compartment strategies for international investors. |
Main stages to create a SIF
- Define investment policy and target investors. Agree on strategy, asset classes, target jurisdictions, leverage policy and the type of well-informed investors to be admitted.
- Choose the legal form and structure. Decide between FCP or investment company, umbrella or single fund, and the preferred company form where relevant.
- Appoint key service providers. Select the AIFM where required, depositary, central administration, auditor and, where applicable, management company.
- Prepare fund documentation. Draft the constitutive documents, offering document and agreements with service providers so they reflect the SIF Law, AIFM requirements and current CSSF practice.
- File for CSSF authorisation. Submit the complete application with documentation and respond to CSSF questions until authorisation is granted and the SIF is registered on the official list.
- Launch and ongoing compliance. Open the fund to investors, call capital, reach minimum capital within the deadline, and comply with ongoing reporting, valuation and risk management duties.
Tax and subscription tax overview
- Income and net wealth tax. In most cases a SIF is exempt from Luxembourg corporate income tax and net wealth tax on its assets, subject to limited exceptions.
- Subscription tax. The standard subscription tax rate for SIFs is 0.01% per year on net assets, calculated quarterly. Certain categories of SIFs or compartments may benefit from exemptions or reduced bases according to Luxembourg law.
- Withholding tax. Distributions by a SIF to investors are generally not subject to Luxembourg withholding tax, without prejudice to foreign or investor-level taxation.
- Investor taxation. Taxation of investors depends on their own tax status and residence. Investors should obtain independent tax advice in their home jurisdiction and in Luxembourg where relevant.
- VAT. Management of SIFs usually benefits from the VAT exemption for fund management services. Other services may remain subject to VAT according to their nature.
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Frequently asked questions
1. What is a Luxembourg Specialized Investment Fund (SIF)?
A SIF is a Luxembourg investment fund aimed at well-informed investors. It is set up under the law of 13 February 2007 on specialised investment funds and must invest in accordance with the principle of risk spreading. It is authorised and supervised by the CSSF.
2. Which law governs SIFs?
SIFs are governed by the Luxembourg law of 13 February 2007 relating to specialised investment funds, as amended. The SIF Law works together with the law of 12 July 2013 on alternative investment fund managers and other applicable financial legislation.
3. Who can invest in a SIF?
Only well-informed investors may invest in a SIF. This includes institutional investors, professional investors under MiFID II and other investors that confirm in writing that they are well-informed and meet the minimum investment or assessment conditions required by law.
4. What is the minimum investment for non-professional investors?
For investors who are not professional or institutional investors, the well-informed investor definition normally requires a minimum investment or commitment of at least EUR 100,000 or, alternatively, an assessment of suitability by a regulated institution or AIFM. The law was updated in 2023 to lower this amount from the previous EUR 125,000 threshold.
5. What legal forms can a SIF take?
A SIF may be organised as a common fund (FCP) without legal personality or as an investment company with variable or fixed capital (SICAV or SICAF). Investment companies can be incorporated as SA, S.à r.l., SCA, SCS, SCSp or other forms allowed under Luxembourg company law and the SIF Law.
6. Is a SIF always an alternative investment fund (AIF)?
In practice, most SIFs qualify as alternative investment funds within the meaning of the AIFM Directive. They therefore fall under the Luxembourg AIFM Law and must be managed by an authorised or registered AIFM depending on their assets under management and structure.
7. Does a SIF need CSSF authorisation?
Yes. A SIF must obtain prior authorisation from the CSSF before it can start activity. The CSSF reviews the fund documentation, governance and key service providers and keeps the SIF under permanent prudential supervision after authorisation.
8. What is the minimum capital requirement and deadline?
The net assets of a SIF must reach at least EUR 1,250,000 within 24 months following CSSF authorisation. Only a portion of capital must be paid in at subscription, but the minimum net asset level must be achieved within this legal timeframe.
9. What are the diversification rules for SIFs?
SIFs must comply with the principle of risk spreading. Regulatory guidance provides that, as a general rule, a SIF should not invest more than a defined portion of its assets or commitments in securities of the same type issued by the same issuer, subject to specific exceptions. The aim is to avoid excessive concentration of risk.
10. What assets can a SIF invest in?
The SIF regime is flexible. Subject to risk-spreading, a SIF can invest in a broad range of assets, including listed and unlisted shares, private equity, private debt, infrastructure, real estate, hedge strategies, loans, funds of funds and other alternative or traditional assets, provided these are properly disclosed and managed.
11. Does a SIF need an AIFM?
Where a SIF qualifies as an AIF and exceeds the thresholds of the AIFM Directive, it must appoint an authorised AIFM established in Luxembourg or another EU Member State. Below the thresholds, a registered AIFM regime may apply. The AIFM is responsible for portfolio management, risk management and certain regulatory duties.
12. Which service providers must a SIF appoint?
A SIF must appoint at least a depositary established in Luxembourg, a central administration agent and an independent approved auditor. Where applicable, it must also appoint a management company and an AIFM. These entities must be authorised and supervised in accordance with Luxembourg law.
13. How is a SIF taxed in Luxembourg?
In most cases, a SIF is exempt from Luxembourg corporate income tax and net wealth tax on its assets. Instead, it is subject to an annual subscription tax on its net assets at a standard rate of 0.01%, with certain exemptions for eligible investments and specific categories of funds. Local taxes may still apply to underlying assets, for example foreign real estate.
14. Are distributions by a SIF subject to Luxembourg withholding tax?
Distributions of income or capital by a SIF to its investors are generally not subject to Luxembourg withholding tax. However, investors remain responsible for complying with tax obligations in their own jurisdictions and any applicable international reporting rules.
15. How are SIF units or shares valued?
The SIF Law requires valuation at fair value, unless the constitutive documents provide otherwise. The valuation rules must be described in the fund documentation and applied in a consistent and reliable manner. For AIFs under the AIFM regime, valuation policies must also comply with AIFM requirements.
16. Can a SIF be structured as an umbrella with sub-funds?
Yes. A SIF can be set up as an umbrella structure with multiple separate sub-funds. Each sub-fund can have its own investment policy, currency, fee structure and share classes, with segregation of assets and liabilities between sub-funds as provided by Luxembourg law.
17. Can a SIF be marketed across the European Union?
Where a SIF is managed by an authorised EU AIFM and qualifies as an AIF, the AIFM may use the AIFMD passport to market the SIF to professional investors in other EU and EEA Member States. Local rules and notification procedures must be followed in each host country.
18. What reporting duties apply to a SIF?
A SIF must prepare audited annual financial statements and provide periodic information to investors as described in its offering document. Under the AIFMD framework, transparency reports, regulatory filings and risk reports may be required to the CSSF and, where relevant, to other authorities.
19. How did the 2023 law modernise the SIF regime?
The 2023 law modernising Luxembourg fund legislation lowered the well-informed investor minimum investment threshold to EUR 100,000 for certain investors, extended the period to reach the minimum capital from 12 months to 24 months and aligned various definitions and technical points across SIF, RAIF, SICAR and UCI regimes. These changes apply in addition to existing SIF rules.
20. When is a SIF chosen instead of a RAIF or other fund type?
A SIF is often chosen where sponsors want a fully regulated product with direct CSSF product supervision, for example for certain institutional mandates or where investors require a CSSF-regulated structure. A RAIF or other structure may be preferred where speed to market and flexibility are more important than direct product authorisation. The choice depends on strategy, investor expectations, regulatory appetite and cost considerations, and should be assessed with professional legal and tax advisers.
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This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
