LUXEMBOURG Law and Practice Contributed by: Evelyn Maher, Gaston Aguirre Draghi and Djelloul Mansour, BSP
in Luxembourg. The home state supervision must also be equivalent to that provided in Luxembourg. 2.3 Regulatory Environment 2.3.1 Regulatory Regime The regulatory regime applicable to an AIF dif - fers depending on the type of fund. All AIFs are indirectly subject to the provisions of the AIFM Law. The extent to which the AIFM Law is appli - cable depends on whether they are managed by a fully authorised AIFM or a registered AIFM. The Part II UCI is subject to investment restric - tions and risk diversification rules arising from the Law of 17 December 2010 on undertakings for collective investment (the “UCI Law”) and various implementing CSSF circulars. For exam - ple, generally, a Part II UCI cannot: • invest more than 10% of its assets in securi - ties that are not listed on a stock exchange and are not traded on another regulated mar - ket that operates regularly and is recognised and open to the public; • acquire more than 10% of the same type of securities issued by the same issuing body; or • invest more than 20% of its net assets in securities issued by the same issuing body. These general investment restrictions do not apply to Part II UCIs that are fund-of-fund struc - tures if the investment funds in which the Part II UCI shall invest are open-ended and themselves subject to similar general investment restrictions. In addition, these general investment restric - tions do not apply to Part II UCIs that are mainly investing in either venture capital or real estate or are pursuing alternative investment strategies.
Part II UCIs may in principle borrow the equiv - alent of up to 25% of their net assets without restriction as to the intended use thereof. Part II UCIs that are mainly investing in real estate may borrow the equivalent of up to an average of 50% of the valuation of all their properties. Borrowings of Part II UCIs that are mainly pur - suing alternative investment strategies (hedge funds) may be up to 400%. For SIFs, there are no asset restrictions, but the SIF may not invest more than 30% of its assets or commitments in securities of the same type issued by the same issuer. A RAIF that has chosen the SIF regime is subject to similar rules. A SICAR is obliged to invest its funds in assets representing risk capital but is not subject to any diversification rules. A RAIF that has chosen the SICAR regime is subject to the same rules. In general, an SLP is not subject to any invest - ment restrictions or risk diversification rules. AIFs may choose one of the EU labels, such as European venture capital fund (EUVECA), Euro - pean social entrepreneurship fund (EUSEF) or ELTIF, in which case they will also be governed by the rules applicable to those regimes. 2.3.2 Requirements for Non-Local Service Providers Luxembourg AIFs may be managed by an AIFM based in a member state of the EEA. If an AIFM established in another member state intends to market units or shares of an EEA AIF that it man - ages to professional investors in Luxembourg, the competent authorities of the home member
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