The Association of the Luxembourg Fund Industry (ALFI) has welcomed the new
law on Specialised Investment Funds, adopted last month by the Luxembourg Parliament.
“I am convinced that this innovative new legal framework will open up
new possibilities for fund promoters in the area of alternative and institutional
investment funds,” commented Thomas Seale, president of ALFI.
The law on Specialised Investment Funds replaced the July 1991 law which
concerned collective investment schemes reserved for institutional investors.
The 1991 law was viewed as a success: as at November 2006, 207 institutional funds existed,
with combined assets under management of EUR76 billion.
All the provisions of the 1991 law are to be found in the new law, so existing
institutional investment funds will not find that their legal base has disappeared.
However, the SIF law offers a number of interesting new features, including
a broader definition of “eligible investors” to include both professional
and private “well-informed” investors.
The new law likewise offers
greater flexibility in terms of investment policy. The principle of risk spreading
has been maintained, but there are no quantitative investment restrictions,
given that such vehicles would be reserved to sophisticated investors.
The law requires that the directors (dirigéants) of a Specialised Investment
Fund, as well as the directors of the custodian bank and the auditor, be approved
by the CSSF.
However, the promoter is not subject to CSSF approval. Furthermore,
since the investors in funds targeted by this law are deemed to be sufficiently
experienced to make their own decision with regard to the fund manager, there
is no need for the CSSF to verify the status and financial standing of a company
to which asset allocation has been subcontracted.
ALFI is the representative body of the Luxembourg Fund Industry, which, as
of November 30th 2006 managed assets of EUR1.8 trillion, and was the largest cross
border fund domicile in the world.
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