Hedge Funds / Funds of Hedge Funds in Luxembourg

As at June 30, 2008, alternative investment Funds represent roughly EUR 188 billion (USD 296 bn), or 9% of the total assets under management in Luxembourg. This figure includes all products serviced from all jurisdictions and administered in Luxembourg (Source: ALFI).

In Luxembourg, the appetite for alternative investment strategies is growing. Currently, a total number of 99 Hedge Funds and 104 offshore Hedge Funds are domiciled and/or administered in Luxembourg, corresponding to EUR 42,431 million (USD 66,888 m), respectively EUR 12,136 million (USD 19,132 m) of assets under administration.

Similarly, a total number of 206 Funds of Hedge Funds and 245 offshore Funds of Hedge Funds are domiciled and/or administered in Luxembourg, corresponding to EUR 75,667 million (USD 119,281 m), respectively EUR 57,446 million (USD 90,558 m) of assets under administration.

Regulatory background

The CSSF Circular of 1991 allows, among other things, the launch of products applying alternative investment strategies: extensive use of derivatives, short selling, leverage through borrowings, real estate investments, venture capital Funds and Funds of Hedge Funds.

To simplify the rules applicable to Luxembourg-domiciled Hedge Funds and to clarify the main investment restrictions applicable to short selling, leverage and derivatives, the Regulator issued at the end of 2002, CSSF Circular 02/80 on investment Funds using alternative investment strategies. This Circular is applicable to regulated Hedge Funds and open to all investors. Retail Investors can invest in such Non-UCITS products. This has helped to significantly reduce the time needed to approve new products.

Furthermore, a new vehicle has become available since the law on Specialised Investment Fund (SIF) entered into force on February 13, 2007. This law further reduces the time to market as no pre-approval from the Regulator is needed before launching the Fund.

How PwC Luxembourg can help you

With the help of our highly qualified and experienced professionals in Luxembourg and the network of fund specialists throughout the world, PricewaterhouseCoopers offers:

  • Assistance with the set-up and establishment of Hedge Funds through regulatory, tax and operational advices, the optimization of fund and management company tax set-up, advices in local and cross-border outsourcing and regarding fund consolidation
  • Assurance of Hedge Funds through statutory audits and long form reports, SAS 70 and AIMR-GIPS certification
  • Performance improvement advisory to the fund, compliance and AML system selection and implementation, benchmark and cost optimization, financial risk management, research, and training through our dedicated entity, PwC ACADEMY

Our Hedge Funds Leadership Team