This episode is also available as a blog post: https://10leaves.ae/publications/adgm/guide-to-the-adgm-category-4-investment-advisor-license

The ADGM is an upcoming international financial centre in the MENA region for business and fintech. The quality of ADGM’s independent regulator, the prevailing common law framework, excellent infrastructure and tax efficiencies make it the perfect base to take advantage of the rapidly growing demand for financial and business services in Abu Dhabi and the greater MENA region.

Why setup a financial services firm in the ADGM?

The ADGM is one of two international financial centres in the UAE. Established in 2015, it quickly rose through the rankings and is now counted as one of the top 25 financial centres in the world. ADGM’s innovative SPV regime, its initiatives in the fintech space and its issuance of the region’s first cryto-asset regulatory framework, have all contributed to its success.

Clients who wish to cater primarily to the Abu Dhabi market, sovereign wealth funds and Abu Dhabi family offices may consider setting up in the ADGM.

This episode is also available as a blog post: https://10leaves.ae/publications/luxembourg/luxembourg-securitisation-vehicles

Why setup a securitisation vehicle in Luxembourg?

In Luxembourg, securitisation of a wide range of assets, loans, bonds, incomes and risks is allowed. In addition to this, risks related to debt, movable or immovable property, tangible and intangible assets are also allowed to be securitised.

In general, anything that is a store of future income can be securitised in Luxembourg.

Issuers mainly use securitisation as an alternative to funding from banks and other formal lending institutions. Luxembourg offers many investment vehicles that can be used for securitisation transactions.

Luxembourg has an extensive Securitisation Law, that is innovative and designed for cross-border transactions, especially in the European Union. This has become very popular and there are currently more than 1500 securitisation vehicles, with over 7,000 compartments in Luxembourg, resulting in over 35% market share in all of Europe.

Other advantages include:

This episode is also available as a blog post: https://10leaves.ae/publications/luxembourg/luxembourg-specialised-investment-fund-sif

Advantages of setting up a SIF in Luxembourg

The following are the advantages of setting up a SIF in Luxembourg:

This episode is also available as a blog post: https://10leaves.ae/publications/luxembourg/setting-up-a-private-equity-structure-in-luxembourg

How do I establish a PE fund in Luxembourg?

Luxembourg offers multiple fund structures for private equity transactions.

Specialised Investment Fund, or SIF, is the most flexible investment fund structure, that can be used for multiple asset classes and investment strategies, including Private Equity deals.

The Luxembourg SIF is a supervised corporate vehicle and usually reserved for professional or qualified investors. It has low diversification requirements and can also be established as an umbrella fund with multiple sub-funds, thus allowing for multiple deals in the same structure. A Luxembourg Specialised Investment Fund can also qualify to obtain an AIFMD passport, given that it satisfies some mandatory conditions.

The Luxembourg Investment Company in Risk Capital, or SICAR, is also a supervised investment vehicle. The main purpose of the SICAR is to invest in risk-bearing assets, and is meant to be used as a vehicle for professional and qualified investors. SICARs are not obliged to follow risk-spreading obligations or diversification requirements. A Luxembourg SICAR can also qualify to obtain an AIFMD passport, given that it satisfies some mandatory conditions.

This episode is also available as a blog post: https://10leaves.ae/publications/luxembourg/reserved-alternate-investment-funds-raif-in-luxembourg

What is a Luxembourg RAIF?

The Reserved Alternative Investment Fund was created following the implementation of the AIFMD. Structurally, it is a combination of the Specialised Investment Fund (SIF) and the Investment Company in Risk Capital (SICAR).

However, unlike the SIF and SICAR, the RAIF is not ordinarily supervised by the Luxembourg CSSF. This allows the fund to be launched quickly, since double-supervision is avoided. However, a RAIF would have to appoint a CSSF-regulated Fund Manager (AIFM).

The Luxembourg RAIF is very popular in the EU, and there are around 650 RAIF established as of 2020.

Can a RAIF be sold to all investors?

A Luxembourg RAIF can only be sold to qualified investors, which include institutions and professional investors.

In some cases, prospective investors can declare that they a) can invest a minimum of Euro 125,000 or obtain a confirmation from a credit institution, an investment bank or a management company, certifying their expertise, experience and knowledge in sufficiently judging and understanding the implications of an investment made in the RAIF.

This episode is also available as a blog post: https://10leaves.ae/publications/luxembourg/investment-company-in-risk-capital-sicar-in-luxembourg

What is a Luxembourg SICAR?

The investment company in risk capital (SICAR) is an investment fund structure in Luxembourg. It is governed by the SICAR Law of 2004, and can mainly invest into risk-bearing assets, without the requirement of spreading or diversifying the risk. The SICAR is only open to qualified investors.

A Luxembourg SICAR is regulated by the CSSF. Currently there are over 250 SICARs setup in Luxembourg, with over EUR 58 billion of assets under management.

What assets can the SICAR invest in?

Usually, SICARs invest in unlisted companies, whether in the form of equity or debt. They can also invest in any geography, not just the European Union. Investments into listen companies can also qualify in some instances, for example, when the investment aims to finance a new line of business.

There is no requirement for the SICAR to diversify it’s risks.

This episode is also available as a blog post: https://10leaves.ae/publications/adgm/setting-up-representative-office-in-the-adgm

The ADGM is an upcoming financial centre in the MENA region for business and fintech. The quality of ADGM’s independent regulator, the prevailing common law framework, excellent infrastructure and tax efficiencies make it the perfect base to take advantage of the rapidly growing demand for financial and business services in Abu Dhabi and the greater MENA region.

The ADGM offers a low-cost alternative for firms that wish to explore the market. It allows for the marketing of one or more financial services or financial products which are offered in a jurisdiction other than the ADGM. These products are usually of a head office that is based in a different jurisdiction.

This episode is also available as a blog post: https://10leaves.ae/publications/adgm/comprehensive-guide-to-spvs-in-the-adgm

The Abu Dhabi Global Market (ADGM) has been open for business only since October 2015, but it has already garnered much praise and respect over its efforts to differentiate itself through unique offerings. It pioneered the FinTech Abu Dhabi summit, attended by over five hundred global Financial Technology (FinTech) personalities; and has launched a series of collaborations with different companies such as Temenos, Al Ansari, and Mastercard to help forward its FinTech initiative.

Another such initiative is the Special Purpose Vehicles (SPV) regime. The SPV regime is open to a wide variety of uses, from investor-friendly holding structures, to asset separation and transfer.

This episode is also available as a blog post: https://10leaves.ae/publications/difc/venture-capital-in-the-middle-east

The Middle East in general, and United Arab Emirates and Saudi Arabia in particular, has seen a number of government-led initiatives for technological innovation in recent years. A large untapped market for Arabic-based content, a very young population and excellent technological connectivity makes the region a hotbed for enterprising entrepreneurs who are hungry for success.

VC firms from more mature markets also bring much-needed technological expertise and vast experience in funding and management, both of which are required to grow the ecosystem here.

Co-investment with locally-based venture capital fund managers also makes sense, given their regional expertise. Deals abound in the innovation centres that have been created, and prices are lower than what would be typically available in say Europe, the States or India. Having a local presence and tying up with VC Fund managers here would help create a deal pipeline that can be interesting.

So how does one go about it?

VC Fund Managers who are interested to enter the region, can consider the DIFC as a viable option.

This episode is also available as a blog post: https://10leaves.ae/publications/luxembourg/special-limited-partnership-in-luxembourg

What is a Special Limited Partnership, or Luxembourg SLP?

The SLP is an unregulated Alternative Investment Fund, that can be incorporated in Luxembourg by:

one General Partner (GP) – the fund manager; and

one Limited Partner (LP) – the investor

The Luxembourg SLP structure has been modelled on partnerships that can be setup in other jurisdictions such as United States, United Kingdom and the Cayman Islands. Their strategies are usually illiquid, and typical investments are made in real estate, PE or the debt markets. However, there are no restrictions on the asset classes, or on the fund strategies.

A Limited Partnership Agreement governs the functioning of the SLP and gives the fund the contractual flexibility to organise the fund structure. An SLP is not restricted to any asset class, nor is it subject to risk diversification rules.

There are more than 2,600 SLPs that were set up in Luxembourg between 2016 and 2019.

Who manages a Luxembourg SLP?

The Luxembourg SLP appoints a General Partner, usually a private limited company also established in Luxembourg, to manage and monitor the fund on behalf of the investors, or Limited Partners. A GP has unlimited liability for all obligations of the Luxembourg SLP, and hence it is usually a distinct legal entity.