European Alternative Investment Fund Domiciles

[Provident]

Hi All,

I am currently an intern with a European VC. I've been tasked with comprising a report on European domiciles for a new fund (below 100m Euros).
I've been looking at Luxembourg, the Netherlands and Estonia.
I wondered if any experienced professionals have some insight on European domiciles.
Luxembourg seems to be the gold standard, and the Netherlands overall doesn't seem to be looking to make life easier for fund managers and Estonia is a new domicile with a great new vehicle imitating Lux and the UK.
With the new changes to the AIFMD (starting Aug 2nd 2021) regarding pre-marketing, I'd love to hear some opinions.
Also with regard to taxation and exemptions, any information or sources to study would be greatly appreciated, information around this is severely lacking.
The key factors I am analysing are:
Fund vehicles

• Taxation
• Speed to market
• LP / Investor preference
• Sophistication of national regulator
• Legal system & certainty
• Ease of doing business
• Approach to the AIMFD
• Re-domiciling funds
• Cost of doing business
• Reputation

Many thanks!

 

[Nicholas Van Orton]

Under €100M AIFM in Luxembourg are efficient vehicles, not-so-quick to set-up as they say, particularly‌ with the new demands and KYC procedures from the CSSF. I don't know about the‍ other 2 jurisdictions, but I'd take a wild guess and say that investors will feel⁠ more comfortable with a Lux fund than one based in Estonia. And from what I've⁤ heard, Dutch fund set-up is not for the faint of heart, as it takes quite⁣ some effort and time to complete the process.

Hoep this helps.

NVO

 

[Provident]

Thank you for your insight, Nicholas! Indeed it is very helpful.︀

 

[Nicholas Van Orton]

Forgot to add that Luxembourg AIFMs under €100M, although you've got to file the‍ LPA (Limited Partnership Agreement) and the Subscription Document with the CSSF for their approval (hence⁠ why I mentioned the increased KYC requirements as of just June of this year by⁤ them -tough luck for newcomers, I guess-), they are unregulated (not directly/strictly supervised by the⁣ CSSF or need to file a yearly audit, accounts or NAV data or any other⁢ data for that matter), and so once you're up and running, you're basically good to︀ go pretty much unrestrained. What you DO have to do is to file the list︁ of LPs with the RCS (commercial register) at the end of each year (if you︂ set the fund up through a local agent -recommended- they will take care of this︃ for you), so as to verify % of shares in the fund for each one︄ and that the total stays below €100M. It is also advised that no single LP︅ holds more than 10% of the total value of the fund (ie, €10M at max︆ capacity), as that will trigger further KYC requirements and perhaps your investors won't like it,︇ just saying...

Now, with this better explained (too short of a reply earlier on), I︈ sincerely hope it helps.

NVO

 

[Provident]

Nicholas thanks for further expanding. You've really helped me a lot with your fantastic knowledge.‌

For others viewing this thread, I will post and share my findings once I am‍ done for anyone interested!
There doesn't seem to be many sources comparing and contrasting mainland⁠ EU AIF domiciles so would be glad to help others.

 

[Provident]

Update:

My research shows:

In Europe the main options are:

Luxembourg - Good for large‌ funds (very expensive)
Netherlands - New compelling offerings for a small fund (Under 100m euro),‍ under the Small Managers Act. Takes very long and a complex process
Estonia - Fast⁠ and Cheap (becoming a great option for small funds). Recently increased KYC measures as questionable⁤ crypto funds have been set up there. EFSA doing a full review atm.
Cayman -⁣ Good in conjunction with other domiciles. Prefered by outside investors coming into Europe. Also preferred⁢ by Chinese investors in Asia rather than Singapore