A deep dive into the Luxembourg Management Company Services
19 December 2022 _ News
The recent financial crisis, Brexit, and the increasing regulatory requirements have attracted many new investors to the Luxembourg non-resident market. This has created a demand for Management Companies (herein after “ManCo") to provide specialized professional services. In this blog post, we deep dive into ManCos in Luxembourg, to understand why today it’s popular among Banks and Asset Managers to outsource Management Company Services in Luxembourg.
The history of Luxembourg UCITS Funds
Why do you need a Management Company in Luxembourg?
- The long history and strong reputation of Luxembourg as a Fund Center have increased the confidence of investors, who prefer to invest in EU-domiciled Funds regulated by a competent authority, namely the CSSF (Commission de Surveillance du Secteur Financier).
- Luxembourg has a strong culture of Private Wealth Investment activities, making it a favorable business destination. The strong financial industry has truly turned into a hub for Investment Funds, Banks, and Management Companies. The country also benefits from a stable political environment and strong connections with the rest of the EU territory.
- Luxembourg UCITS (Undertaking of Collective Investment in Transferrable Securities) benefit from a European “Product” passport that allows them to be distributed across the EU and the Economic European Area. With its large pool of multilingual talent, the Grand Duchy’s financial center is a perfect launch pad for new products and services requiring a cross-border appeal.
- Luxembourg has a favorable domestic tax regime that helps to reduce tax burdens.
What are the benefits of an Independent Third-Party Management Company?
- Entrust the Management Company with a consolidated team of professionals with high know-how for Fund Administration and assure the proper oversight of all the other delegated functions and counterparties of the Fund
- Flexibility to adopt the Fund’s investment policy according to the specific needs and requirements of investors. Better risk control and portfolio diversification.
- High protection of assets by the Custodian Bank (Banque Privée Ed. de Rothschild Europe, UBS Europe, CACEIS, etc.).
- Maximum flexibility in the asset allocation.
- Flexibility on the number of investors.
- Cost and tax savings for customers.
What services can a Management Company offer?
- Portfolio Management - A professional service provided by highly experienced Portfolio Managers who manage the investment portfolio daily aiding in setting up an optimal investment strategy.
- Risk Management & Compliance - Risk and Compliance services ensure that all threats to which managed vehicles may be exposed are recognized, assessed, and effectively managed. The department oversees and directly manages financial risk, operational risk, investment compliance, regulatory compliance, and anti-money laundering.
- Legal - Pharus Management Lux S.A., is one of the very few existing Independent Third-Party Management Companies that have an in-house Legal Department. The Legal Service offers expertise in Fund structuring, from the implementation of the offering documentation to the management of the regulatory approval procedure of the Funds with the CSSF. the implementation of all the related agreements is also part of the Legal Service as well as the legal support throughout the Fund's life cycle.
- Corporate Services - The Corporate Services are provided to the Board of Directors of Funds. They include planning and managing the Board meetings, creating Board pack documentation, and supporting the Boards of Directors in their decision-making processes.
- Distribution Services - The department of Distribution Services facilitates the creation of a sufficient and robust distribution network, offering commercial and legal support while simplifying access to Fund platforms, helping to meet regulatory requirements, and reducing legal fees.
- Fund Accounting & Administration Services - Management Companies have consolidated relationships with several Luxembourg high-standing Custodian Banks and delegated service providers, including domiciliary agents, administrative agents, accounting, and transfer agents. The adequacy and the quality of the services provided to the Fund are constantly oversighted.
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