Private Equity in Luxembourg

3rd Edition, November 2016 (Listed members updated in August 2017)

Summary

Luxembourg has become one of the leading jurisdictions worldwide and the leading place for setting up Private Equity and Venture Capital funds. Luxembourg can combine unique strengths that cannot be found elsewhere:

  • The right structures – the large range of available structures ensures that all fund promoters will find the suitable vehicle for their investors. Funds can be set up as regulated or unregulated vehicles for all asset classes with different corporate forms to choose from, as limited partnerships or mutual funds. In accordance with the type chosen, the tax status will vary accordingly;
  • Luxembourg is an onshore EU jurisdiction, a prerequisite for many investors;
  • AIFM distribution capabilities – following the introduction of UCITS in 1988, Luxembourg turned into the most recognized hub for distribution worldwide. With AIFMD Luxembourg is able to leverages on this unprecedented expertise;
  • Sophisticated infrastructure of service providers with a multilingual and technically skilled workforce;
  • Recognized, renown and proven concepts such as 3rd part AIFMs and outsourcing of back- and middle office functions;
  • Luxembourg is a worldwide recognized brand for investment.

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Foreword by the President of LPEA

Luxembourg is now firmly established as the jurisdiction of choice for the European Private Equity industry. Luxembourg is home today to over 80 Private Equity firms with most of the large European GPs and many of the large US GPs now having established operations in Luxembourg. According to LPEA estimates the industry’s assets under management in Luxembourg have boomed to over $300 billion, a figure we expect to continue increasing as new players discover the many advantages this domicile offers.

Multiple factors have been contributing to the industry’s growth. Besides a legal toolbox second to none (Funds, ManCos, Special Purpose Vehicles), political and economic stability, and predictable taxation on the back of an unrivalled financial infrastructure, Luxembourg boasts a business friendly attitude combined with a strong governmental commitment towards Private Equity.

While a wide range of private equity and venture capital funds have been using Luxembourg’s SPV structure and double taxation treaty network as a hub for their cross-border investments, making their structuring both efficient and neutral, an ever growing number of firms are setting up middle and front office operations in Luxembourg to benefit from Luxembourg’s critical size and expertise as Europe’s leading AIFM-EuVECA-UCITS center. This brochure aims to provide Private Equity professionals (LPs included!) and their advisers with a comprehensive yet focused overview of the general business, legal, tax and regulatory environment that Luxembourg offers to the Private Equity industry. Whether you are exploring Luxembourg for the first time or you are refreshing your knowledge, we trust you will find this brochure useful and we at the LPEA are at your disposal to provide you with any further information you may need.

Jérôme Wittamer

President, LPEA

Message from the Minister of Finance of Luxembourg

Confidence and growth are back in Europe. Notwithstanding the present geopolitical risks, governments and companies have found new optimism and are stepping up their investments. An ever growing number of start-ups all across the European Single Market are looking for investors to fuel their expansion. While bank loans are still the preferred
source of funding in Europe, there is a clear need for alternative solutions. In a time of historically low interest rates, investors are also exploring a broader range of investment opportunities. In this context, the role of Private Equity and Venture Capital (PE/ VC) can only grow.

To facilitate these shifts, the European Union is putting into place the Capital Markets Union (CMU). Pushing forward this ambitious project was one of the priorities of last year’s Luxembourg presidency of the Council of the European Union. Indeed, Luxembourg is a strong supporter of deeper and more integrated capital markets and cross-border funding solutions for companies, in particular start-ups and SMEs.

Major international success stories such as Skype, Wix, Spotify or Yo! Sushi are closely tied to Luxembourg and its Private Equity ecosystem. This is no coincidence. While it is largely known as the host to the world’s second largest fund industry and a prime location for international wealth management, Luxembourg‘s financial centre is also a leading European hub for PE/VC operations.

The world’s top 10 Private Equity players have operations in Luxembourg. The whole sector counts around 6000 PE/VC professionals and €300 billion of assets under management. The State of Luxembourg itself has become a player in this field, through the launch of the €150 million Luxembourg Future Fund, which has started to deploy in the area of cybersecurity, as well as the €20 million Digital Tech Fund, launched earlier this year. In this regard, the government follows the same philosophy that has lead it already in the early 80s to be an investor in SES, which has now developed into the world’s leading private satellite operator. In the same sense, the government’s more recent commitment to the space mining venture is yet another illustration of the pioneering spirit that Luxembourg shares with the PE/VC community.

With mounting uncertainties around the globe, Luxembourg stands out as a highly stable and reliable jurisdiction in the heart of the European Union and the Euro zone, offering an unrivalled legal toolbox, sound public finances with a solid “AAA” rating, well established expertise, and a business friendly environment for the PE/VC industry. Add to this a highly skilled and multilingual workforce, an

H.E. Pierre Gramegna
Minister of Finance of Luxembourg