First SICAR Fund Lists On Luxembourg Exchange

by Ulrika Lomas, Tax-News.com, Brussels

14 October 2008

The Luxembourg Stock Exchange has announced that the first SICAR (Société d’investissement en capital à risque), a fund structure which has particular appeal to private equity and venture capital fund managers, has been listed on the bourse.

The admission to trading of Athanor Equities SICAR-SCA took place on the Euro MTF market on October 9, 2008. This fund intends to invest primarily in Europe and developing countries in various types of companies, including those involved in the water sector, renewable energy, real estate and tourism.

Approved by the Luxembourg authorities in 2004, the SICAR offers an alternative to the traditional limited partnership structure which works well for fund managers and investors in countries such as the United Kingdom, but can pose problems for fund managers in continental Europe.

One of the principal advantages of the fund structure is that firms will be permitted to structure funds onshore without being hit by large tax bills. While SICARs are still liable for taxation, participants are able to take advantage of tax treaties and EU directives to limit their exposure to tax. The vehicles also benefit from a light regulatory regime.

Continental investors seeking tax transparency may opt for a SICAR in the form of a limited partnership (SeCS). A SeCS is not liable to corporate income tax or net wealth tax. SeCS are exempt from the municipal business tax; income from the partnership and capital gains realized on units by non-resident partners is not taxed in Luxembourg.

Luxembourg offers a wide range of vehicles for investment funds, including the SICAV (Societe d'investissement a capital variable), an open-ended vehicle having a variable capital which is always equal to the net asset value of the fund, and the SICAF (Societe d'investissement a capital fixte), which is a closed-end fund normally used for private placements. In 2007, the Luxembourg parliament approved a law on Specialised Investment Funds (SIF), which offers a number of new features, including a broader definition of “eligible investors” to include both professional and private “well-informed” investors.

In September, the Luxembourg Stock Exchange announced that there were 5,000 securities listed on the Euro MTF (multilateral trading facility) market. The majority were bonds with 3,429 lines, followed by warrants with 1,354. There were 46 investment funds listed at this time.

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