SIF stands for “Specialized Investment Funds”. In the specific case of Luxembourg, it may be established as an investment fund, as a variable capital investment company (a SICAV by its Spanish abbreviation) or as a fixed capital investment company, a SICAF.
With regard to the investments, they are limited to qualified investors that is, to any Institutional Investor, professional or any other investor who can proof and confirm in writing his position as a well-informed investor and invests at least €125,000 or provides with a certificate issued by a credit institution proving his capacity as an expert investor and his knowledge and expertise to carry out proper investments in a SIF.
This certificate may be issued by (i) a credit institution within the definition provided by Directive 2006/48/EC, (ii) an investment firm based on Directive 2004/39/EC or (iii) a management company within the meaning of Directive 2001/107 /EC. Nevertheless, it must be highlighted that individuals such as investments advisors or managers do not need to prove their capacity as ‘well-informed’ investors.
Minimum capitalization, including capital and share premium, must be, at least, €1,250,000. This amount can be achieved within the twelve-month period after the authorization. Therefore, it is less than in the case of Spain, where capital should amount €2,400,000. In addition, unlike the Spanish SICAV, which requires a minimum of 100 investors, these funds established in Luxembourg can be formed by a single investor.
The "Commission de Surveillance du Secteur Financier” is a public institution that supervises, monitors and controls whether the requirements of Luxembourg law relating to capital are met: qualification of investors and documentation for the establishment, among other requirements. It is also the institution responsible for authorizing the establishment of the SIF before it starts operating.
The SIF- SICAV may be structured by separate compartments, also called sub-funds. Each compartment is formed by an asset and a liability. Since they are considered separate entities, investment policies may also be different and each investor may decide to participate in one or more compartments, depending on his interests. Following that logic of this separation and unless otherwise established in the incorporation by-laws, investors have rights and obligations with regard to the specific fund they have invested in. Therefore, they may be liable for expenses and/or may receive benefits from the specific compartment in which they take part.
Consequently, each compartment will be liquidated separately. In order to fully liquidate the company, each and every sub-fund must be liquidated. The competent Courts, based on the SIF’s registered office, may dictate the dissolution of those compartments without permission to be constituted.
Cross-investment is allowed between compartments. That is to say, a compartment may acquire units in another compartment of the same SIF. However, the purchaser of those shares may not be allowed to invest in the investor compartment subsequently.
Another basic requirement for the establishment of a SIF-SICAV is the appointment of a depositary bank established in Luxembourg in order not only to safeguard and monitor the assets but also to supervise the activity of the management company.
The board of directors shall be established in Luxembourg and may delegate certain faculties to third parties, under supervision. Furthermore, it should be pointed out that accounting, NAV calculation, the share register, subscriptions and redemptions, notifications to investors and the elaboration of financial statements must take place in Luxembourg.
Administrators shall appoint a management company that performs the tasks of representation, monitoring, counseling, accounting and processing of subscriptions and redemptions of shares, plus annual reporting. Furthermore, a custodian entity that may supervise the management company mainly must also be designated.
Regarding the tax regime applicable to Luxembourg’s SIF-SICAV, its taxation is also lower. These structures are subject to an annual subscription tax of 0.01% of their net asset value.
To be clear, the attractiveness of these companies lies in their flexibility of investment, in the reduction of the establishment requirements (such as the minimum initial capital to be provided and the possibility of becoming a single investor) and, of course, in the applicable low percentage taxation.
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