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“Wealth managers, financial advisors, fund managers, family offices, high-net-worth individuals and entrepreneurs will be able to use the platform to establish their own funds in any asset class, including hedge funds, private equity and real estate with no restrictions on leverage.”
thewealthnet, 22 July 2008

The new SIF law of February 2007 does not specify any detailed investment restrictions or leverage rules.  This means that a SICAV SIF can offer access to virtually any asset class and can facilitate the pursuit of almost any investment style.

Nevertheless, the SIF law has been complemented by regulatory circulars, which lay down certain requirements that must be met in order to ensure adequate risk diversification.

Permissable investments therefore include (the list is not exhaustive):

  • Other Mutual Funds
  • Fixed Assets
  • Listed and Unlisted Equities
  • Real Estate
  • Derivatives
  • Cash
  • Contracts for Difference
  • Private Equity
  • Money Market Instruments
  • Corporate Bonds
  • Commodities
  • Notes and Certificates
  • Exchange Traded Funds
  • Undertakings for Collective Investments (UCIs)

The risk diversification rules detailed below all apply in principle, although the Luxembourg regulator, The Commission de Surveillance du Secteur Financier (CSSF), may provide exemptions on a case-by-case basis. It may, on the other hand, request that additional restrictions are adhered to, in cases of funds with specific investment policies.  

  • A SIF cannot invest more than 30% of its assets or commitments in the same types of securities issued by the same organisation.

    However, this restriction is not applicable to investments in securities issued or guaranteed by OECD Member States, their local authorities or supranational bodies or organisations. Nor is it applicable to target UCIs which are subject to risk diversification principles that are least comparable to those relevant to SIFs.

  • Short selling cannot result in the SIF holding more than 30% of its assets in uncovered securities of the same nature issued by the same organisation.

  • When using financial derivative instruments, the SIF must ensure comparable risk diversification through appropriate diversification of the underlying assets. Counterparty risk of privately negotiated (OTC) operations must be limited according to the quality and qualification of the counterparty.
 


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