SIF - Specialised Investment Funds

The Specialised Investment Fund (SIF) is a regulated, operationally flexible and fiscally efficient multipurpose investment fund regime for an international, institutional and qualified investor base. In comparison with institutional funds created under Part II of the Law of 20 December 2002 on undertakings for collective investment, the SIF is characterised by greater flexibility with regard to the investment policy, broadening of the sphere of investors and a more relaxed regulatory regime.

Investors

 
Investment in a SIF is reserved for “well-informed” investors requiring a limited level of protection and looking for investment flexibility suitable to their particular expertise and needs.
 
Pursuant to article 2 of the SIF Law “well-informed” investors comprise:
 
  • institutional investors;
  • professional investors;
  • and other investors who confirm in writing that they adhere to the status of “well-informed” investors and who either (i) invest a minimum of EUR 125,000 or (ii) have been assessed by a credit institution, an investment firm or a management company which certifies the investors’ ability to understand the risks associated with investing in the SIF.

Promoter

 
There is no need to appoint a promoter to launch the SIF. But if the SIF does have an initiator/promoter, the latter is not subject to a minimum capital requirement or to authorisation by the CSSF.

Legal framework

 
Law of 13 February 2007 relating to specialised investment funds
 
CSSF Circular n° 07/283: Entry into force of the law of 13 February 2007 relating to specialised investment funds
 
CSSF Circular n° 07/309: Risk-spreading in the context of specialised investment funds
 
CSSF Circular n° 07/310: Financial information to be produced by specialised investment funds
 
CSSF Circular n° 08/372: Guidelines for depositaries of SIFs adopting alternative investment strategies, where those funds use the service of a prime broker 

Eligible assets and risk diversification requirements

 
There is no restriction in terms of eligible assets of a SIF.
 
Risk diversification requirements are defined by CSSF Circular n° 07/309 and are less stringent than the ones in application for Part I (UCITS) and Part II (UCI) funds. The risk management function is not regulated. 

Legal form

 
A SIF may take the legal form of a common fund (FCP – fonds commun de placement) or may be constituted as an investment company (SICAV – Société d’investissement à capital variable or SICAF – Société d’investissement à capital fixe). The FCP has no legal personality and thus must be managed by a management company.
 
A SICAV/SICAF can choose from several legal forms:
 
  • société anonyme (SA) – public limited company;
  • société à responsabilité limitée (Sàrl) – private limited company;
  • société en commandite par actions (SCA) – partnership limited by shares;
  • société coopérative organisée comme une société anonyme (SCoSA) cooperative company organised as a public limited company.
 
These different entities may be set up as a single fund or as an umbrella fund consisting of multiple compartments, each with a different investment policy. The fund and compartments respectively may have an unlimited number of share classes, depending on the needs of the investors to whom the fund is distributed.
 
The structures may be open-ended or closed-ended. 

Capital requirement

 
The net assets of a SIF may not be less than 1,250,000 Euros. This minimum must be reached within a period of twelve months following its authorisation. Only 5% of the capital needs to be paid up on subscription.
 
If the SICAV/SICAF is incorporated as
 
  • a public limited company (SA) or a partnership limited by shares (SCA), the SIF must have a minimum capital of 31,000 Euros upon incorporation;
  • a private limited company (Sàrl), the SIF must have a minimum capital of 21,500 Euros upon incorporation.

Authorisation and supervision

 
As a regulated vehicle, the SIF must be approved by the Luxembourg supervisory authority. However, it may commence activity prior to receiving approval from the CSSF, but the application for approval must be filed within a month following its creation. The authorisation will be granted subject to:
  • approval of the constitutional documents;
  • approval of the choice of depositary bank and auditor;
  • notification of the directors of the fund or managers of the management company.
 
UCI are supervised by the CSSF and must fulfil detailed reporting requirements.

Distribution

 
SIFs do not benefit from a European passport.

Taxation

 
Investment funds created under the SIF Law pay an annual subscription tax (taxe d’abonnement) of 0.01% of their net asset value on the last day of every calendar quarter.
 
Investments certain money market and pension funds or SIFs investing in other funds which are already subject to subscription tax are exempt from subscription tax. The same applies to microfinance investment funds.
 
A fixed capital duty which was payable by the investment fund on incorporation was abolished as from 1 January 2009.
 
Investment funds incorporated as investment companies are subject to a registration duty of 75 euros at incorporation and in case of modification of the articles of incorporation, as well as transfer of the effective place of management or registered office to Luxembourg. Investment funds constituted as FCPs are not subject to this registration duty.

Service providers

 

  • Management company:

 
A common fund has no legal personality and thus must be managed by a management company.
 
The individuals who effectively conduct the business of a management company must be of good repute and be sufficiently experienced in relation to the type of SIF to be managed. The management company must have an initial capital of at least EUR 125,000.
 

  • Depositary bank:

 
Luxembourg SIFs must appoint a credit institution as depositary bank which is responsible for both the safekeeping of assets and the supervision of the fund and its management company (FCP).
 
The individuals who represent the depositary bank must be of good repute and have sufficient and relevant experience.
 

  • Central administration:

 
The central administration of a SIF must be in Luxembourg, but certain functions may be outsourced to a third party for the purpose of a more efficient conduct of business. This concerns the accounting, NAV calculation, keeping of the register of shareholders/unit holders, handling of subscriptions and redemptions, communication with investors and preparation of financial statements.
 

  • External Auditor:

 
The fund (SICAV) or its management company (FCP) prepares an annual report which is to be audited by an authorised external auditor with appropriate professional experience. There is no obligation to produce a semi-annual report.

 

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