US Fund Managers Using A Luxembourg Host AIFM: Any Impact On The Investment Process? – New York Office Snippet

Loyens & Loeff New York regularly posts ‘Snippets' on a range of EU tax and legal topics. This Snippet focuses on the impact of engaging with a Luxembourg Host AIFM on a fund's deal process.

US Fund Managers (“USFM”) aiming to raise capital in Europe may want to benefit from an EU marketing passport to accommodate EU-wide distribution. A Luxembourg Alternative Investment Fund (“Lux AIF”) managed by a Luxembourg Authorized Host Alternative Investment Fund Manager (“Lux Host AIFM”) comes with that benefit.

A Lux Host AIFM must assume two core functions: risk management and portfolio management (respectively “RM” and “PM”). The PM function executes the investment strategy, and the RM function monitors whether proposed transactions comply with the fund's risk profile. As the USFM has designed the fund's investment strategy, it should assume the PM function. This requires a transfer of the PM function from the Lux Host AIFM to the USFM. A delegation arrangement is