For investment vehicles based in countries like the US, Israel, Singapore, Hong Kong, and Canada, Luxembourg’s securitisation framework offers a streamlined solution to access European capital markets. Luxembourg-based Special Purpose Vehicles (SPVs) can issue asset-backed notes (ABNs) that appeal to European professional investors through tax efficiency, compliance with EU regulations, and a flexible structure that supports both traditional and digital finance models, including tokenization.
Since the enactment of Luxembourg’s securitisation law in 2004, the country has developed a reputation as an ideal gateway for foreign entities looking to access European capital markets. This framework offers several advantages for non-EU issuers:
- Lower Cost and Enhanced Efficiency
Setting up a securitisation vehicle in Luxembourg is more cost-effective than establishing a full fund structure. With a lighter regulatory framework, issuers can avoid the administrative and compliance burdens of traditional feeder funds, resulting in lower costs and a faster time-to-market. This appeals to foreign entities that need a rapid, efficient entry into the EU, making it an especially attractive option for US, Israeli, Singaporean, and other non-EU investment vehicles seeking access to European capital. - Streamlined Compliance and Flexible Regulatory Options
Luxembourg’s SPVs offer a structured and compliant pathway for non-EU issuers to meet EU regulatory standards. The framework adheres to key EU requirements, including the EU Prospectus Regulation, anti-money laundering (AML) regulations, and know-your-customer (KYC) processes. This allows issuers to operate across EU member states without needing to establish separate compliance frameworks in each jurisdiction, simplifying the complexities of cross-border investment. Furthermore, Luxembourg-based SPVs can issue dematerialized ABNs or utilize blockchain technology to offer tokenized notes, enabling compliance within both traditional and digital finance models. - Tax Efficiency for EU Investors
Luxembourg securitisation vehicles offer a tax-efficient investment structure that is advantageous for both issuers and investors. ABNs issued by Luxembourg-based SPVs are aligned with EU tax frameworks, meaning that EU investors can often benefit from reduced or eliminated tax penalties compared to investments in non-EU structures. This tax efficiency increases the appeal of Luxembourg-issued securities for EU-based professional investors, making it easier for foreign entities to attract European capital.
How It Works: Raising Capital in the EU
Investment vehicles from the US, Israel, Singapore, Hong Kong, Canada, and other regions can raise capital in the EU by issuing debt securities through a Luxembourg-based SPV. These securities are structured as asset-backed notes (ABNs) that give investors indirect exposure to underlying assets like real estate, venture capital, intellectual property, and other high-value sectors. Here’s a breakdown of how the process works:
- Issuance of Asset-Backed Notes (ABNs)
The Luxembourg SPV pools assets from the investment vehicle’s portfolio and backs the ABNs with these assets. ABNs can be issued as traditional securities or as tokenized digital assets on public blockchains, offering options that meet the preferences of various investor types. - Collateral Management and Market Accessibility
The SPV handles the collateral, asset pooling, and management processes, ensuring that European investors have a streamlined entry into the fund’s portfolio. Issuers can choose to list the ABNs with ISIN numbers, making them easily tradeable on recognized markets. Additionally, tokenized ABNs may be used to support blockchain-based transactions, enabling a broader investor base that includes participants interested in both traditional and digital finance. - Tokenization and Enhanced Liquidity
With Luxembourg’s securitisation framework, issuers can tokenize ABNs, creating digital securities that offer enhanced liquidity and transparency. Tokenized ABNs can be traded on digital exchanges, making it easier for investors to buy and sell holdings. This can be particularly beneficial for foreign entities, as tokenization often reduces the time needed to settle transactions, provides real-time asset tracking, and broadens the range of available investors. By combining blockchain technology with Luxembourg’s established financial infrastructure, securitisation vehicles offer a modern, accessible pathway to European capital markets.
Benefits for Financial Operators
Financial operators, including wealth managers, family offices, and private banks, benefit significantly from the Luxembourg securitisation model:
- Cross-Mandate Investing
By utilizing securitisation, operators can pool investments across multiple mandates, streamlining access for various client portfolios. - Keeping Assets Under Management (AUM)
Securitised notes allow operators to maintain AUM within a single structure, even when investing in alternative assets, ensuring continued management of the client’s funds without transferring to other mandates. - Enhanced Transferability and Liquidity
ABNs are more attractive for secondary buyers, providing financial operators with increased flexibility and liquidity options for their clients, particularly for high-value assets that would traditionally be illiquid. - Efficient Collateralization
Securitisation facilitates the use of alternative assets, such as real estate or private equity, as collateral. Banks are more likely to accept securitised assets due to their ease of valuation, helping operators offer their clients more favorable credit terms.
Broader Market Access Through Securitised Offerings
Luxembourg’s securitisation law supports issuers from diverse jurisdictions and provides a robust, flexible solution for accessing the EU market. Through securitisation vehicles, foreign entities from countries like the US, Israel, Singapore, Hong Kong, Canada, and beyond can raise capital effectively, leveraging Luxembourg’s regulatory advantages and tax-efficient structures.
This approach facilitates market access while allowing for tailored investment structures, including the option to issue both dematerialized and tokenized ABNs. These vehicles support ISIN listings, which provide credibility and transparency for EU investors. As digital finance continues to evolve, Luxembourg’s securitisation model integrates both traditional and modern financing solutions, making it a comprehensive and compliant platform for raising capital within the EU.
Luxembourg’s flexibility and investor-friendly environment ensure that securitisation vehicles remain an appealing gateway for international investment vehicles, reinforcing the country’s position as a global leader in securitised offerings.
