A telling number

Six hundred and thirty-eight SIFs were registered as at the end of March 2008. This means that more than 400 new SIFs were created since the enactment of the law of February 13 2007 relating to specialised investment funds (the SIF Law). This is in addition to the institutional funds existing under the earlier regime, which were automatically converted into SIFs

Thanks to its light regulation, operational flexibilty and tax efficiency, the SIF has established itself as the reference onshore fund vehicle for sophisticated investors – those that are institutional, professional and well-informed. A SIF is not limited regarding investment policy or strategy. It starts with the more traditional long only investment strategy, and includes hedge funds, private equity funds or property funds; it also covers funds for arts or commodities. Taking advantage of the possibility to set up a SIF as an umbrella with one or more sub-funds (compartments/protected cells) the SIF regime offers well-known operational efficiencies.

With speed-to-market playing an ever increasing role, a SIF may in principle be launched before obtaining its regulatory registration. The application for approval shall be filed with the CSSF within one month of the SIF's launch.

While the SIF regime has become an international reference for European or global property funds, a significant number of SIFs also invest in primary and secondary direct and indirect private equity transactions.

A dedicated PE vehicle

The number of authorised SICARs stood at 191 as at mid-April 2008, with many more in the process of being reviewed by the CSSF.

Although the enactment of the SIF regime may have triggered questions about the relevance of the SICAR regime when compared with the highly successful SIF regime, the two regimes now thrive side by side.

The SICAR is a dedicated private equity and venture capital investment company. The SICAR law characterises risk capital along the following lines: medium- to long-term (mostly illiquid) investment, a development, added value or turn-around strategy in respect of the target businesses, and an exit plan over the medium- to long-term.

Next to the more traditional leveraged buyouts and other private equity transactions, venture capital investment policies are gaining further ground in the context of renewable energies and related technologies.

After almost four years in existence, the SICAR regime is set to be overhauled for the first time. A bill is pending that will modernise the SICAR regime. The most important change will be the introduction of compartments or protected cells for SICARs. This will allow initiators to combine investment strategies and policies in one legal entity, with the benefit of ring-fencing. The SICAR will also no longer be required to publish a net asset value with a pre-set reporting frequency. A series of other amendments, including a change to the role of the Luxembourg custodian bank (in that it will no longer need to verify the regularity of certain operations) will make the regime even more flexible.

About the firm

Loyens & Loeff Luxembourg is an integrated law and tax advisory practice which comprises more than 100 fee-earners. The Luxembourg office is affiliated with Loyens & Loeff, which has over 800 fee-earners in 18 offices in the Benelux and the main financial centres around the world. Loyens & Loeff Luxembourg is committed to offering the highest standard of integrated corporate, banking and finance, investment management and tax law advice. The office mainly serves large and medium-size corporate clients, banks and other financial institutions and investment funds, operating internationally.

Contact
Marc Meyers
+352 466 230 306
marc.meyers@loyensloeff.com