PRIVATE EQUITY IN LUXEMBOURG
… has a long tradition
Luxembourg has set an ambitious agenda to attract Private Equity houses to provide more middle-office related work out of Luxembourg, in particular with regard to increasing substance requirements and AIFMD-related requirements.
The Government has put in place a high-level working group consisting of key players of the financial services industry to develop a strategic plan to this end.
Out of the 10 largest Private Equity houses worldwide,
9 are doing business out of Luxembourg. Most have started by leveraging the advantages that Luxembourg holding companies provide when structuring Private Equity acquisitions.
But business interests have since driven more substance to Luxembourg. This originally discrete business with little local presence in Luxembourg is fundamentally changing as Private Equity houses enhance their presence in Luxembourg by establishing or ramping up operational and other capabilities.
A clear trend toward enhanced transparency and regulation drove Luxembourg to respond by introducing the regulated private equity and venture capital vehicle SICAR in 2004 and the SIF in 2007 which, in retrospect, anticipated many of the legal requirements that are now found in the Alternative Investment Fund Managers Directive (“AIFMD”).
Combining flexibility in legal and tax structuring, a reputable and stable financial environment and efficient infrastructure has brought hundreds of Private Equity participants, both established and emerging, to set up some or all of their Private Equity vehicles in Luxembourg.