Luxembourg offers a platform of services and structuring opportunities to the private equity industry. Products include competitive structures for setting-up private equity funds, such as the investment company in risk capital (SICAR) and the specialised investment fund (SIF). Luxembourg has thus emerged as a prime jurisdiction for the structuring of private equity acquisitions and financings.
With the implementation of a dedicated private equity investment vehicle, the SICAR in 2004, Luxembourg confirmed its commitment to the private equity industries. Another common vehicle for private equity investments is the SIF.
In addition to these two regulated Luxembourg fund vehicles, Luxembourg has built up its market share in private equity funds thanks to its non-regulated special purpose companies (such as the SOPARFI - financial participation company), which are used for private equity acquisitions and financings alike. A SOPARFI is typically used for holding and financing private equity investments. It may thus equally serve as a special purpose vehicle, a joint venture vehicle or, more rarely, a private equity fund vehicle.
Consult ALFI’s or LPEA’s brochure Luxembourg Private Equity Investment Vehicles and get an overview of the different structures available.
As a result of the implementation of AIFMD, Ireland has taken the opportunity to consolidate and remove certain local rules with maximum reliance on the AIFMD framework. This approach, combined with new changes, has led to significant enhancements for QIAIFs structured as property and private equity funds.
The QIAIF offers PE managers a potential solution to this problem of fund raising within Europe. The Irish QIAIF has been able to avail of the AIFMD distribution passport since July 2013 and is therefore able to market its units to professional investors across Europe with relative ease and in a more cost efficient manner.
The Irish QIAIF can be structured as an investment company, unit trust, common contractual fund, investment partnership or an Irish Collective Asset-management Vehicle ("ICAV") (Ireland's newest investment structure which can elect to "check the box" to be treated as a partnership for US tax purposes). They can also be established with either an external alternative investment fund manager ("AIFM") or as an internally managed alternative investment fund, whereby the fund acts as both the manager and the fund, thereby placing most of the regulatory obligations on the fund and not the PE manager. The self-managed structure also permits non-EU managers to access the AIFMD passport, which they otherwise would not be able to do.