Hedge Funds

The choice of structure will depend, among other things, on the type of investor to be targeted, the investment strategy and tax considerations.

Luxembourg hedge funds are authorised and regulated by the financial sector supervisory authority (Commission de Surveillance du Secteur Financier - CSSF).

Despite it's relatively late start, Luxembourg is now catching up fast with off-shore fund centres. As the trend for regulation continues, the number of hedge fund managers who will choose Luxembourg or even move to Luxembourg is likely to increase. Recent regulation has made a move to Luxembourg particularly attractive for managers from a fiscal point of view.

More details on hedge funds in Luxembourg can be found in the following Luxembourg for Finance brochure:

Hedge funds can be set-up under three different regimes: SIF, Part II UCI and Part I UCI. The choice will largely depend on the investment strategy selected and the targeted investor base. While UCITS are subject to tighter regulations, they offer more favorable distribution opportunities for cross-border public distribution. For more details please view the table below: (Source: Luxembourg for Finance):

 Investment Manager: as a hedge fund is a company or partnership incorporated with the sole objective to manage its own assets, it may appoint an Investment Manager to make investments in the strategies indicated in its offering memorandum. The latter is a separate entity with its own employees, consultants, adviser, managers, etc.

Domiciliation Agent: provides a registered office to the Hedge Fund. In Luxembourg this function is regulated by the law on domiciliation (31 may 1999)

Custodian/Prime Broker: the custodian is appointed to receive in custody the assets of the funds while the Prime Broker acts as counterparty for derivative contracts, security lending,  short selling, trade execution, clearing and settlement.

Administrator: the administrator's main activity is to calculate the NAV of the Fund based on its assets under management and the management fee or performance fees due to the investment manager. It may perform other back office functions.

Transfer Agent/Registar:  deals with subscriptions and redemptions by investors and holds the register of shares

Banker: receives the subscription and redemption and manages the cash of the Fund

Auditor: generally a chartered auditor who carries a mission of certification of the fund’s accounts and verifies the way NAV, subscription, redemption, manager’s fees have been calculated.

Distributor: the distributor is marketing the fund to investors.