Luxembourg is the world’s second-largest fund domicile after the USA, and in respect of this, there are numerous structures available for different types of investment fields, as well as for several types of investors in Luxembourg. Among these are the undertakings for collective investments (UCI) – which is a type of investment fund in Luxembourg that offers investors the chance to generate income, access a portfolio with multiple investments, and share the associated costs.
The main characteristics of UCIs in Luxembourg
| UCI | an investment fund that can invest in all types of assets which doesn’t meet the standards set by the EU Directive |
| Applicable legislation | UCI Law – The Luxembourg law of 17 December 2010 on undertakings for collective investment Part I (“UCITS Law”) |
| Eligible investors | Unrestricted |
| Eligible assets | Unrestricted by law but specific restrictions are applied by the CSSF. |
| Risk diversification requirements | Risk diversification requirements are defined by IML Circular 91/7 The CSSF employs the following risk diversification requirements (unless a derogation is approved of by the CSSF during the approval process) (non-exhaustive list): maximum 20% in securities issued by one issuer; andmaximum 20% in one real estate property |
| Legal Structure | Fonds Commun du Placement (FCP), Societe d’Investissement a Capital Variable (SICAV) Societe d’Investissement a Capital Fixe (SICAF) |
| Segregated compartments(yes/no) | Yes |
| Capital requirements | the net assets held by an UCI registered as an FCP must have at least a value of 1,250,000 euros and must be achieved in 6 months after authorization. in the case of a SICAV and SICAF company, the minimum value is 300,000 euros at the time of the authorization. |
| Net asset value (NAV) calculation and redemption policy | The Net Asset Value (NAV) is the UCI’s subscription or saving price. It is evaluated by dividing the fund’s net asset value by the number of units in issue. This can be done daily, weekly or monthly, etc. |
| Subscription tax | annual subscription tax is set at a rate of 0.05% on the net value of the assets evaluated on the last days of each calendar quarter. A reduced rate of 0.01% applies to funds marketing cash and institutional funds. UCI funds can also gain from tax exemptions if they invest in special pension funds or in funds which already gains from exemptions from the subscription tax |
| Taxation | Exemption | Corporate income tax | Wealth tax | Withholding tax (except if EU Savings Directive applies to it) |
| Authorisation and supervision by the CSSF | Yes, must be authorised and supervised by the Commission de Surveillance du Secteur Financier (CSSF) before and after commencing activities |
| Possibility of listing | Yes |
| European passport | A UCI may, or may not, have a European passport enabling it to be marketed freely throughout the European Union, depending on whether it acknowledges European Directives or not. |
| Thin capitalization rules (debt-to-equity ratio) | Can borrow up to 25% of net assets without any restrictions. |
| Required Luxembourg service providers | a sponsor or initiator; a management company;an investment adviser and a manager, a domiciliation agent;a distributor and a candidate. |
Investors choose to invest their assets in a undertakings for collective investments (UCI) because the assets raised from a large number of investors can be fused. And due to the size of the funds raised, the fund manager can access a broad range of different securities and stock markets that personal investors could not access on their own.
Its funds are also so diverse that they can meet the certain needs of every investor. Also, UCI benefits from the double tax treaty network.
To set up your investment fund in Luxembourg, let’s go ahead and contact your Damalion expert now.
Register your Luxembourg Undertakings for Collective Investment (UCI) — vehicle choices (Part I UCITS vs Part II UCIs), compartments and share classes, CSSF authorisation steps, service providers (ManCo/AIFM, Depositary, Administrator, Auditor), investor disclosure, governance and reporting, and how Damalion coordinates from term sheet to launch.
For asset managers, promoters, family offices and platforms • Damalion coordinates structuring, timelines, document alignment, and provider onboarding so your counsel and service providers can execute smoothly. You approve; the CSSF and banks decide where required.
Last updated:What is a Luxembourg UCI in practice?
“UCI” is the umbrella for collective investment funds in Luxembourg. Regimes include UCITS (Part I) for retail distribution and Part II UCIs for broader strategies and investors. Both can be set up with compartments and multiple share classes to tailor strategies, currencies, and fee schedules.
UCITS vs Part II — quick comparison
| Topic | UCITS (Part I) | Part II UCI |
|---|---|---|
| Investor base | Retail/professional; EU passport | Wider, incl. retail subject to rules; no UCITS label |
| Strategy | Eligible assets & risk limits per UCITS | Flexible (incl. alternatives) with disclosure and risk control |
| Supervision | CSSF authorisation & on-going supervision | CSSF authorisation & on-going supervision |
| Management | UCITS ManCo (or self-managed SICAV) | AIFM/ManCo depending on strategy |
| Depositary | Mandatory credit institution in LU | Mandatory; scope per regime |
| Documents | Prospectus, KIDs, articles, agreements | Prospectus/Issuing doc., articles, agreements |
Documents and information stakeholders expect
- Term sheet: strategy, target investors, compartments/classes, fee policy, distribution plan.
- Prospectus/Issuing document and constitutional docs (AoA/LPA as relevant).
- Service provider mandates: ManCo/AIFM, Depositary, Central Administration/Registrar, Auditor, Paying agents, Distributor(s).
- Risk management, valuation, best execution and conflicts frameworks.
- AML/KYC packs for sponsor/UBOs and fund bank onboarding file.
- Operating model: subscription/redemption, swing pricing/dilution levy (if any), NAV calendar, reporting.
CSSF authorisation — step by step
- Scoping & structure map. UCITS vs Part II, legal form (SICAV/SICAF/FCP), compartments and classes.
- Provider selection. ManCo/AIFM, Depositary, Central Admin/Registrar, Auditor, paying/distribution agents.
- Drafting pack. Prospectus, constitutional docs, agreements, risk/valuation policies, KIDs (UCITS).
- CSSF filing. Submit application and respond to comments; align timelines with providers.
- Banking & operational readiness. Open accounts, NAV timetable, registrar and transfer procedures.
- Authorisation & launch. Final approval, go-live, disclosures and initial reporting calendar.
Operations and governance
- Board/management oversight, minutes and policies kept in Luxembourg.
- Risk management, valuation controls, and incident registers maintained by ManCo/AIFM.
- Depositary cash-flow monitoring, safekeeping and oversight.
- Financial statements (Lux GAAP/IFRS where applicable) and audits per calendar.
- Investor reporting (UCITS KIDs/PRIIPs KIDs; AIFMD Annex IV for AIFs within scope).
Related reading
Frequently asked questions
What’s the difference between UCITS and Part II?
UCITS targets retail/professional distribution with strict eligible assets and risk limits; Part II is flexible, including alternatives, but without the UCITS label.
Which legal forms are available?
SICAV/SICAF companies and FCP contractual funds; umbrella structures with compartments are common.
Do I need a ManCo or AIFM?
UCITS require a UCITS ManCo (or self-managed SICAV); Part II with alternative strategies typically appoint an authorised AIFM.
Is a Depositary mandatory?
Yes. A Luxembourg Depositary is required for UCITS and Part II UCIs.
How long does CSSF approval take?
Depends on completeness and complexity; align the application with provider readiness to compress the timeline.
Can I launch multiple compartments?
Yes. Umbrella UCIs can open additional compartments with separate policies, currencies and fee schedules.
What investor disclosures are required?
Prospectus/Issuing document, KIDs for UCITS/PRIIPs, periodic reports, and ongoing notices per regulation.
How are fees presented?
Clearly in the prospectus and KIDs: management, performance, depositary, admin, distribution and other costs.
Can I delegate portfolio management?
Yes, subject to ManCo/AIFM oversight and CSSF rules on delegation and due diligence.
What are typical tax points?
Subscription tax (taxe d’abonnement) applies to many UCIs; assess withholding/treaty access at asset level.
How are NAVs calculated and disclosed?
Per prospectus policy by the Central Administrator; frequency depends on strategy (often daily/weekly/monthly).
What about distribution outside Luxembourg?
UCITS use the EU passport; Part II requires local registrations/notifications as applicable.
Can the fund be marketed before authorisation?
No, save for permitted pre-marketing to professionals in specific cases; follow local rules.
How does Damalion help?
We coordinate structure mapping, provider selection, drafting alignment and critical path management alongside your legal and tax advisers.
What banking arrangements are needed?
Fund cash accounts with the Depositary and operating accounts as required; clear signatory and cash-control procedures.
