The EU sponsor can choose to use a Luxembourg-based authorised third-party fund manager (“Host AIFM”) for the fund’s management. This option comes with an EU fund marketing passport, granting EU-wide access to institutional investors. Operating without a Host AIFM requires compliance with fragmented marketing and reporting rules across EU member states. Typically, the Host AIFM provides responsibility for compliance functions (risk management) and delegates buy and sell decisions (portfolio management) to the Sponsor.

To launch a Luxembourg fund, it is furthermore essential to appoint a domiciliation agent to register the fund at a Luxembourg address. This agent typically also provides board members, ensuring robust local governance. Both aspects are crucial for the fund to be recognised as a product governed by Luxembourg law and regulations. Additionally, the domiciliation agent usually supports the opening of a bank account and manages filings with the company and beneficial ownership register.

The fund also requires a local Luxembourg administrator, who plays a pivotal role by maintaining the fund’s books and records, supporting valuations, processing subscriptions and redemptions, coordinating investor communications and reporting, and handling anti-money laundering compliance.

A Luxembourg-based depositary is usually mandatory for Luxembourg based funds. The depositary safeguards the fund’s assets, monitors cash flows, and oversees compliance with investment and operational rules.

All the above services can be allocated to independent providers or umbrella providers that offer the services under one and the same corporate brand, so-called one stop shop solutions.

Finally, EU sponsors must appoint a Luxembourg-based auditor to certify financial statements, verify compliance with regulatory requirements, and reinforce investor confidence through an independent pair of eyes.  

Selecting service providers is not just a regulatory obligation; it represents a longstanding strategic partnership for EU sponsors as these service providers will be involved throughout the entire lifespan of the fund.

EU sponsors should undertake a thorough and thoughtful selection process to ensure they choose the right partners. This is especially true for the selection of the AIFM and the administrator, as they interact primarily with the sponsor’s organisation. The gap between starting the selection process and signing service agreements is typically about two months.

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