RESPONDING TO THE AIFM DIRECTIVE - THE LUXEMBOURG SPECIALIZED INVESTMENT FUND

Responding to the AIFM Directive The Luxembourg Specialized Investment Fund A practical guide March 2012 Contents Foreword 2 01 | SIFs 4 02 | Setting up and running a SIF 8 03 | Risk management, diversification, valuation and conflicts of interest 18 04 | Key service providers and delegation 20 05 | Distribution of SIF products 24 06 | Fund information and reporting 26 07 | Expenses and taxation 28 Foreword It is my pleasure to welcome you to Ernst & Young’s practical guide to Luxembourg Specialized Investment Funds (SIFs), Luxembourg’s primary investment fund vehicle catering for all types of “alternative investment fund” (AIF) products – i.e., hedge funds, real estate funds, private equity funds and other alternative funds, as well as traditional funds which are not registered a UCITS1. Since its launch in 2007, the SIF has been used extensively to launch all types of AIF products. It is expected that the Alternative Investment Fund Managers (AIFM) Directive2 will further boost its use significantly over the coming years. From July 2013 onwards, investors in AIF products will have two broad options: • AIFs subject to a set of harmonized pan-European regulatory standards • AIFs not subject to such standards From 2013 until at least 2015, only European domiciled products from European-domiciled alternative investment fund managers (AIFM) will benefit from these pan-European regulatory standards. It is expected that, over a period of time, the AIFM Directive will establish a quality “AIF brand” for AIFM Directive-compliant products, comparable to the “UCITS” brand established by the UCITS Directive for the traditional products. Investors in alternative products will therefore expect alternative investment groups to offer them a range of products, including AIFM Directive-compliant products. From 2018 onwards European investors may face limitations on their investments in non-AIFM Directive compliant products. With these deadlines looming, alternative investment groups (including initiators, sponsors, advisers, general partners and managers of all types of non-UCITS funds) are carefully considering the domiciles of their future AIF ranges. 1 Undertakings for collective investment in transferable securities, meeting the requirements of the UCITS Directive, Directive 2009/65/EC. 2 Directive 2011/61/EU on Alternative Investment Fund Managers. 2 The Luxembourg Specialized Investment Fund For many, Luxembourg will be their domicile of choice, and the SIF their AIFM Directive-ready investment fund vehicle. The SIF will offer the alternative investment groups inter alia: • A well-established, flexible, regulated investment fund vehicle adapted to any type of investment fund strategy (see Section 1.2.) • Access to all the advantages of Luxembourg, including its position as the world’s leading cross-border distribution hub (see Section 1.4.) • AIFM Directive-compliant products: • Access to the “AIF brand”, reflecting the success of the UCITS brand, a truly international product whose reputation is renowned on a global basis • A passport to distribute to investors across the EU (see Section 1.5.) • Non-AIFM Directive-compliant products: • Medium-sized self-managed AIFs, outside the scope of the AIFM Directive • AIFs of smaller managers which benefit from AIFM Directive exemptions The purpose of this practical guide is to provide, in a clear and concise format, an overview of the SIF regime and how it fits within the AIFM Directive. We hope you find the guide useful. My colleagues and I look forward to any questions you may have. Best regards, Michael Ferguson Ernst & Young, Luxembourg EMEIA Regulated Funds Practice Leader +352 42 124 8714 Michael.Ferguson@lu.ey.com The Luxembourg Specialized Investment Fund 3 ... - tailieumienphi.vn