SIFs as Alternative Investment Fund (“AIF”) are investment funds that which are not already covered by the European Directive on UCITS (Undertakings for collective investment in transferable securities), but they are covered, regulated and governed by the European Directive on Alternative Investment Fund Manager Directive (“AIFMD”).
As one of the first European countries, the Luxembourg Parliament adopted the law transposing the Alternative Investment Fund Manager Directive (AIFMD) into Luxembourg law on 12 July 2013, Luxembourg.
Key Advantages for Investment Managers/ Advisors
SIFs are not designed for retail investors but for sophisticated investors looking for maximum flexibility. As a SIF is an approved AIF, it benefits from the European passport and can be registered for distribution in all EU Member States which considerably accelerated the process of distributing and marketing a fund and reduced related costs.
Type of Strategies
Since it may invest in any type of assets, the SIF is suitable for establishing anything from a traditional securities or money market funds to the creation of a real-estate fund, hedge fund or private equity fund.
Flexible Diversification Rules
In principal, a SIF cannot invest more than 30% of its assets or commitments to subscribe to securities of the same nature issued by the same issuer. However the CSSF may provide exemptions from these restrictions on a case-by-case basis
Key Advantages for Investors
A SIF could be closed or open ended. SIF funds will often have lower Net Asset Calculation frequency . This frequency could be minimum once a year.
AIFs are required to report comprehensively and adequately to investors on their portfolio holding. However, AIFs have less strict publication obligations than UCITS funds, which are by definition destined for the retailed public.
AIFs are obliged to put in place an effective system to monitor, measure and manage portfolio investment risk. They must also be structured so as to limit as far as possible the risk of conflicts of interest between the fund and its investors. AIFs, like UCITS funds, have several obligations attached to the delegation of tasks to third parties. In addition, like UCITS Funds, CSSF need to approve the management company, the fund, the custodian bank, the central administrator and the auditor of each AIF.