Luxembourg embraces AIFM Directive

Luxembourg’s Minister of Finance aims to have legislation in place by the end of the year to make the popular fund domicile compliant with the AIFM Directive. The legislation will also contain financial instruments to entice more business to the country.

By the end of the year Luxembourg will have passed its Alternative Investment Fund Managers (AIFM) Directive legislation in a bid to capture more private equity business.

“We want to support an open market and not create a fortress,” said Luxembourg’s Minister of Finance, Luc Frieden, at the Association of the Luxembourg Fund Industry conference.

Giving a speech at the event the minister confirmed the implementation of the AIFM directive into law was imminent as Luxembourg aims to be the first European country to transpose the directive.

The “legal package” that Frieden plans to adopt will include tax benefits and reforms of company law. “We are going to implement not only the Directive but, we have added a number of provisions to facilitate and frame the development of the alternative industry as a whole,” added Frieden.

Luxembourg will also provide provisions on carried interest to make the fund centre more attractive to managers.

The implementation could potentially be seen as premature as the Directive’s level two measures are yet to be finalised by the European Commission. However sources indicate that this is a good move as investors will view fund managers that are AIFM-compliant in a more favourable light.

Luxembourg will also maintain fund structures for firms that do not qualify for the directive. “We will continue to have funds and managers that are out of scope or exempt from the directive so we must have flexibility,” said Jacques Elvinger, partner at Luxembourg law firm Elvinger, Hoss and Prussen.

Luxembourg is the largest fund domicile in Europe with the fund industry currently holding assets under management of €2,217 billion in the country.