Alternative funds: In one of its last legislative acts before likely being dissolved this week, Luxembourg’s parliament has approved new “alternative investment” rules required by Brussels.
With fortuitous timing, Luxembourg’s parliament has passed widely anticipated “alternative investment” fund regulations that government and industry leaders hope will help expand the Grand Duchy’s financial sector.
The new EU rules, called the AIFMD, will regulate investment funds meant for professional or savvy investors, such as hedge and real estate funds. Brussels’ directive has to be implemented into national law across the EU28 by July 22. Among its provisions, the AIFMD allows such funds to have a “passport” similar to Ucits mutual funds, which means they can be sold across EU borders.
Luxembourg’s Chamber of Deputies voted in favour of the bill introduced by finance minister Luc Frieden (photo, right) on Wednesday morning, before a government confidence debate took place Wednesday afternoon and evening. Although no confidence vote was held, on Thursday prime minister Jean-Claude Juncker will ask Grand Duke Henri to dissolve parliament and call for new elections--likely to be held in October 20--which would have delayed passage of the alternative investments measure.
On Wednesday Frieden said in a press statement that passage of the funds bill was: “essential to further promote the diversification and internationalisation strategy that the government has pursued since 2009 in order to preserve the country’s reputation and insure its attractiveness.”
The Grand Duchy did not simply adopt the necessary language issued by Brussels, but also added several measures to make Luxembourg a more attractive hub for alternative fund firms, according to the finance ministry.
Industry cites competitive advantages
This includes the creation of a “limited partnership” structure--common in countries with English common law systems, but unusual on the Continent--and a new “carried interest” regime, specifically designed to attract more private equity and hedge fund managers to set up shop in the Grand Duchy.
“With the legislative process now complete, the regulated alternative investment fund industry in Luxembourg is ready to take off,” Marc Saluzzi, chair of the Association of the Luxembourg Fund Industry, said in a press statement.
“AIFMD pushed the alternative fund management industry towards a model which is based on the compromise of more regulation in exchange for a passport. This is the same as the Ucits model which we know so well in Luxembourg, and, combined with the fact that we already have a well-established ‘alternatives’ industry, the law puts the Luxembourg financial centre in a strong competitive position to develop our hedge, real estate and private equity activities even further,” Saluzzi said.