The Draft Bill 6318 Amending The Luxembourg Law Of 13 February 2007 Relating To Specialised Investment Funds

The draft bill 6318 amending the Luxembourg law of 13 February 2007 relating to specialised investment funds (hereafter the "Bill") has been filed by the Luxembourg government before the Luxembourg Chamber of Deputies on 12 August 2011. This Bill takes into account in particular the adoption of the Directive of the European Parliament and of the Council of 27 May 2011 on alternative investment fund managers (hereafter the "AIFM Directive"). It also attempts to modernise the Luxembourg law of 13 February 2007 relating to specialised investment funds (hereafter the "SIF Law") by implementing certain provisions already existing under the Luxembourg law of 17 December 2010 on undertakings for collective investment (hereafter the "UCITs Law").

In detail, the changes proposed by the Bill can be (inter alia) summarised as following:

Authorisation process with the CSSF

First of all, specialised investment funds ("SIFs") shall now be submitted to the prior authorisation of the CSSF before carrying out their activities. This change will create the same authorisation process (at least from a timing perspective) as currently existing for collective investment funds under the UCITs Law.

The risk management and conflict of interest

The Bill introduces the concept of "risk management" and "conflict of interest" stemming from the AIFM Directive. SIFs shall implement an appropriate risk management system to limit the risk linked to the investment positions and their contribution to the general risk profile of the portfolio. In addition, SIFs shall also be structured and organised in order to limit any possible conflict of interest with their counterparts or any persons linked to SIFs.

Investment management

In order to exclude the possibility to set up a passive SIF having an investment activity limited to shareholding, the Bill introduces the definition of the "management" of the assets, which is an activity including at least the management of portfolio meaning that SIFs should carry out a real and active management of their portfolio.

Delegation to third parties

The Bill follows the same provisions as given under the UCITs Law when it comes to the delegation of tasks by the management of the SIF...