Expanding your capital raise to Luxembourg
Expanding your capital raise to Luxembourg Luxembourg’s position as a key jurisdiction for alternative funds offers a compelling path for Nordic managers who wish to
17 August 2025
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Expanding your capital raise to Luxembourg
Luxembourg’s position as a key jurisdiction for alternative funds offers a compelling path for Nordic managers who wish to broaden their investor reach, and establishing a Luxembourg-based vehicle is a natural extension of a firm’s Nordic strategy. Nearly two-thirds of Luxembourg’s total assets under management are allocated to alternative funds. Retail participation in alternative strategies (i.e. outside of the UCITS scope) is also expanding and there are attractive choices available for teams seeking capital from both professional and non-professional investors.
Why Luxembourg?
Many emerging managers for small and mid-size funds hesitate to establish a cross-border fund structure, expecting prohibitive establishment costs, particularly regarding regulatory and compliance. However, properly tailored solutions (e.g., selecting an SCSp or working with third-party AIFMs) can mitigate these concerns. Luxembourg’s well-established infrastructure of service providers for establishment and administration can help mitigate expenses while making costs more predictable.
A common stumbling block is underestimating Luxembourg’s quirks and skipping those all-important local contacts, which can swiftly yield unworkable fund structures, sudden service-provider swaps mid-fundraising, extra cross-border flights, and confused communications between Nordic teams and their Luxembourg counterparts. The unfortunate upshot? A rather sour first impression of the Grand Duchy. Careful forethought and the right partners from the get-go can spare everyone a world of frustration, time and money.
Despite a manager being based or investing in the Nordic region the strategic advantage of Luxembourg cannot be overstated and for managers looking to realize long term fund-raising strategies Luxembourg remains the leading fund-domiciliation hub in Europe with steadily growing inflows from a broad spectrum of cross-border investors. In 2024 for example, alternative investment funds (“AIFs”) in Luxembourg had 2.5 trillion euros under management. This figure demonstrates how attractive Luxembourg has become and how its regulatory environment has succeeded, in just a few decades, in meeting the market’s diverse structuring and regulatory needs.
Whether it’s an emerging firm or a more established group seeking cross-border expansion the Luxembourg fund market can offer a valuable bridge to global capital. As in all jurisdictions establishment requires dedicated oversight for AML and regulatory compliance but establishing in Luxembourg also rewards fund managers with reputational stability, deep fund-management infrastructure, and recognised international standing. Under the right conditions setting up a Luxembourg AIF is also often seen as a strategic milestone for long-term growth in today’s globalised market.
How long does it take?
For teams with a finished investment proposal a minimum of three months is often recommended to establish a fund structure in Luxembourg, which includes the processes of structuring, drawing up the necessary documentation and pre-marketing registration. This is in addition to regulatory notification with supervisory authorities (and, if applicable, approval by supervisory authorities of specific product features). Fund managers should also plan for potential bottlenecks on the part of service providers, in particular in relation to the KYC checks carried out at onboarding.
What does it cost?
One of the first questions raised by non-Lux teams eyeing the Grand Duchy of Luxembourg for a vehicle is almost always “how much does it cost”? This is an important aspect for teams as investors are ever keener on keeping establishment and related costs to a minimum.
Though the costs are highly dependent on the complexity on the structure (see further below) and whether only professional investors will be eligible, a basic feeder vehicle allowing a Nordic team to source funds via Luxembourg is very manageable and the establishment costs are similar, if not even lower, than a similar structure in the Nordics. Bear in mind that the fund industry is a very well-developed industry in Luxembourg and competition among service providers is fierce.
Hence, tapping into the network of service providers becomes paramount but with proper guidance establishment of new structures can usually be achieved in a cost-efficient way and the annual recurring costs are competitive even for small to medium sized funds.
High-Level Overview of Luxembourg Vehicles
There are several different vehicles available for fund managers establishing AIFs in Luxembourg and the options provide varying degrees of tax transparency, governance options, marketing options and regulatory burden.
Choosing a suitable legal form is an important first step and will impact cost and establishment timeline. For example, a team wishing to market the fund to semi-professional investors will require a different platform than if the structure is a feeder for professional investors only. In sum, vehicles can be divided into contractual vehicles and corporate vehicles:
- Contractual Vehicles
These include the special partnership or “SCSp,” which mirrors certain features of widely established Anglo-Saxon GP/LP setups. It is popular among small and mid-size managers for its relative simplicity, extreme flexibility, time to market and alignment with AIFMD requirements.
- Corporate Vehicles
These are generally established with variable capital (a “SICAV”) and might take the form of a partnership limited by shares (“SCA”) or a public limited company (“SA”).
Depending on the investor base and marketing strategy different product laws (e.g., the “SIF,” “SICAR,” “RAIF,” or “Part II funds”) may apply, each with distinct benefits, requirements and tax implications (transparent or opaque).
To avoid confusion, it should be noted that “SICAV” or “RAIF” are features assigned to a structure (SCA, SA, etc.) and thus are not a pre-defined product in themselves. First, a legal structure is needed which can then be assigned characteristics such as a variable share capital (and thus qualify as a SICAV) or a particular product regulation (such as RAIF, SIF or Part II fund).
Investor type drives choice of vehicle
Marketing, or “offering” AIFs, whether established or not, is premised on correct marketing licenses and in Luxembourg there are strict requirements even for so called “pre-marketing” activities. Hence it is of utmost importance to identify the type of investors eligible to participate in the fund at an early stage as changing structures mid-way is likely a costly affair which will also slow down the process significantly.
Options for marketing to a broader investor base generally include the UCI Part II, or European labels (such as ELTIFs or EuVECAs). In addition, certain product laws also offer the option to market an investment fund to “Well Informed Investors”. This concept applies in Luxembourg for certain AIFs subject to specific product laws (including the RAIF, SIF and SICAR). The AIFMD passport is only applicable for professional investors and may not, for example, permit active marketing of a RAIF to “Well Informed Investors” that are not professional investors in another EU-jurisdiction than Luxembourg (e.g. Sweden). Alternatives exist and will need to be assessed on a case-by-case basis.
For funds wishing to market to professional investors the Reserved Alternative Investment Fund (“RAIF”) has, since implementation in 2016, become popular thanks to its swift time-to-market and “indirect” oversight provided the structure requires a fully authorised AIFM.
“SICAV” or “RAIF” are, however,atures of the product (SCA, SA etc.), not a vehicle form. Hence a RAIF classification is not entity dependent and can be based either on a contractual or corporate vehicle provided the requirements for a RAIF are met.
Practical Considerations When Setting up a Fund
After identifying the presumed investor base to enable selection of the right legal form (e.g. SCSp, SCS, SCA, SA) appropriate product law (n.b., RAIF, SIF, SICAR, UCI Part II), and as the case may be European label (e.g. ELTIF), teams need to address compliance, administration, and cost factors which may be more pronounced for emerging or smaller managers.
- AML/CFT Regime
Luxembourg enforces a comprehensive framework for Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT). All entities, including sub-threshold managers, must implement detailed AML policies and appoint both a “responsable du contrôle du respect des obligations” (“RC”) and a “responsable du respect des obligations” (“RR”). Steep legal fees and administrative requirements often arise around these functions if planning is insufficient.
- Detailed Service Provider Landscape
When launching an AIF, teams typically need an external fully-fledged AIFM (to the extent required), a depositary bank, fund administrator, auditor, and – where necessary – a separate transfer agent. Coordination among these parties is critical for meeting regulatory obligations and investor expectations but due to the well-developed eco-system in Luxembourg many of these requirements can be met by third party service provides, including using a third party AIFM (or “fund hotel”). A few practical considerations also include that:
- Setting up banking relationships in Luxembourg can be time-consuming; and
- While service provider fees may initially appear higher compared to some other jurisdictions, the highly competitive Luxembourg ecosystem enables emerging teams to leverage market competition to secure cost-effective solutions and comprehensive service packages that often result in lower costs than Nordic alternatives.
Nordic Perspective
Sweden and the rest of Scandinavia is an excellent base for teams rooted in Nordic culture and strategy and while Sweden and adjoining jurisdictions are rightfully praised for fostering innovation, tech, and sustainable finance, local tax-laws and range of fund structures available can pose challenging for managers looking to reach international investors. By combining Luxembourg structures with local Scandinavian vehicles, managers can tap into global distribution channels without jeopardizing local relationships.
By way of example a new private equity team may choose to keep its Swedish flagship fund while setting up a master-feeder arrangement in Luxembourg. The structure would take advantage of Luxembourg’s extensive structuring options and tax-benefits while allowing passporting of professional investors.
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