IFLR 1000
The Guide to the World's Leading Financial Law Firms

The last year has been an important one for investment funds, as the law updates and the market begins to emerge in a concerted way from the marginal slowdown that was the global economic crisis.

"There is a definite pattern showing, in that investment funds in Luxembourg are evolving," says one partner, who adds: "There will be new legislation and hedge funds will be more regulated. The government, and all of us lawyers, really want to develop this."

Another investment funds lawyer weighed in with his approval of the new regulatory landscape in Luxembourg, and says: "It will make investing with Luxembourg far more attractive when it's all regulated properly."

To be specific, the really big news with regards to investment funds this year is the adoption of Ucits IV (Undertakings for Collective Investment in Transferable Securities), with Luxembourg being the first country to put these new EU-led rules in place. The changes are extremely important in respect to increasing the efficacy and profitability of funds, as partners explain: "These new Ucits regulations are very important. It means you can set up funds to be managed elsewhere, and streamlines the entire process," says one, and another sees it in a broader sense: "It helps Luxembourg promote itself as a platform, and hedge fund managers can use Ucits structures to give access to other investors, not just sophisticated ones."

One partner states the benefits clearly: "Mergers of funds will be much more possible. There will also be an increased scope for cross-border management of these funds."

As well as the possibility of cross-border fund management, the new rules also allow for master-feeder structures. This means, for instance, a fund can directly invest in its own sub-funds, aimed at specific niche interests, though this flow of funds cannot be reciprocal.

Overall, the new aspects of the law in this area are coming thick and fast, and will place demands on lawyers active in the market. "There is a tsunami of regulations coming as policy makers want to regulate everything. We will have to be more sophisticated to navigate through all these new regulations," comments a partner.

Headed up by Claude Kremer, Arendt & Medernach's investments practice is acknowledged as one of the market leaders and has been very active this year, both maintaining its current mandates and in attracting new clients.

This work has included acting for Ignis Asset Management, which was looking to set up its inaugural Ucits fund (Undertakings for Collective Investment in Transferable Securities). This resulted in the creation of Ignis Global Funds Sicav, which is an open-ended collective investment fund. Arendt & Medernach also rendered its legal services as an advisor to Carnegie Asset Management Denmark, as they undertook a wholesale restructuring of the Luxembourg investment funds under its management.

The firm's current client list does also boast some big names, including Goldman Sachs International, for whom a team advises on the everyday running of their Goldman Sachs Structured Investments Sicav, and Barclays Capital, which required legal assistance when setting up sophisticated sub-funds, under an umbrella Sicav, for Celsius Investment Funds.

It isn't all Ucits-based work though, as the firm does manage some Special Investment Funds (SIFs) too. This includes advising Goldman Sachs Specialized Investments, MPC Global Maritime Opportunities and the European Kyoto Fund, which is aimed specifically at investments in carbon assets.

"EHP has good contacts and a good level of knowledge. As a whole its knowledge is wide-ranging," says one client, summing up the firm's investments practice quite neatly.

Other clients are pleased with the level of engagement and speed of communication with the team there too: "They were usually very quick to respond to our queries, much better than previous firms," comments a Ucits (Undertakings for Collective Investment in Transferable Securities) client.

Partner Michel Mengal has been very active this year, getting involved on the vast majority of standout work the team has acted on.

The highlight was arguably advising Barclays Wealth, as it merged its Barclays Luxembourg Portfolios Sicav (société d'investissement a capital variable), which used the Euro and the Dollar, with the Barclays Luxembourg Portfolios Sicav that used Sterling. This competed in December 2010, with the new fund encompassing ten sub-funds managing over €2.3 billion worth of assets.

Practice head Jacques Elvinger also got his hands dirty this year advising, alongside Sophie Laguesse, a private equity manager from Swiss Singapore who was structuring a Sicar (société d'investissement en capital à risqué - a vehicle for collective venture capital investments) that is being geared towards investing in district energy funds in China.

The team there also boasts a well regarded partner, Jerome Wigny, who many have praise for. "Jerome Wigny should be on your leading lawyers list. He is outstanding," says one, while another competitor agrees with this: "Jerome Wigny at Elvinger is very, very good."

Linklaters is a serious big-hitter in investment funds management in Luxembourg, drawing praise even from its closest competitors.

"Linklaters is arguably the best, and I don't like to say that as they are our biggest competitors. They have a good quality," says a rival partner.

Industry stalwart and managing partner Freddy Brausch is co-head of the global Investment Managers Sector in Luxembourg and is backed up by respected partners Hermann Beythan and Francine Keiser.

A good representative deal was led on by Brausch, as the team advised Ikogest and Promobe on the setting up of a regulated property fund, called Lynx Investment Fund. The fund is intended to develop all manner of property, including offices, homes and shops in Luxembourg. With an initial inception value of €500million, the firm hopes to have assets under management to the tune of €5 billion on completion of projects and then propose to exit.

Linklaters can also point to a prestigious client list, including names like BlackRock, Deutsche Bank, Merrill Lynch, Morgan Stanley, RBS and Barclays Capital.

"I haven't seen BSS on much for two or three years. They are invisible," says one partner bluntly, though the firm's investments team does do some work for clients on both Special Investment Funds and collective venture capital investment funds, or Sicars.

In terms of work, Bonn Schmitt Steichen has been active, mainly on more structural mandates. It is also the case that leading lawyers Luc Courtois and Corinne Philippe have been working, often as a team, on the most visible.

In one they are advising Banca Fideuram as to a wide restructuring of sub-funds and making arrangements for securities lending. Courtois on his own has also been advising UBI Banca as it looks to merge and rationalise certain funds that it manages. Both of these clients engage BSS for day-to-day matters and, as such, they are still ongoing.

Managing partner Alex Schmitt was also involved here, advising Generali Group as they looked to introduce some new, innovative products into the market.

Allen & Overy has a robust investment practice that also takes in alternative funds, such as hedge funds, in a very big way alongside more traditional vehicles too.

A highlight deal was a team advising the prestigious Moscow School of Management as it set up a Sicar. This venture capital vehicle has been put in place so that future MBA students at the school can finance projects as part of their studies.

Another unique deal was constructing a master-feeder structure for AP4, a Swedish pension fund, so that it can gain access to alternative investment strategies through listings on the Luxembourg regulated market. This work represents one of the very few listed note issuance programmes organised inside an investment fund in Luxembourg.

Clifford Chance is a firm that is very much pushing toward the higher tiers. The team is led by Joelle Hauser, who is something of a star and highly regarded in the market.

"Joelle Hauser is very commercial. She's good," says one competitor, and another agrees: "She sells herself well, and has a very good, technical approach."

Clients too seem more than happy with Hauser and her team, especially how adaptable and creative they were: "I was very much impressed with them. Our fund was done in a certain way, it wasn't mainstream so it required special needs and they managed to do it well."

The team was heavily involved with a number of large international clients over the past 12 months. A good representative deal was Joelle Hauser advising Axa Real Estate Investment Managers France in setting up a specialised investment fund. This fund was created to invest in mortgage loans on all manner of properties, from industrial assets to hotels, in Western Europe. Split into two sub-funds of €600 million each, the total value of the fund comes to €1.2 billion, with the work being completed in early 2011.

Management head Marc Meyers advised the German private equity firm Capital Management Partners as it closed one of its funds. The fund had been focused on turnaround investments in Luxembourg, and the work was completed in March 20"Loyens & Loeff is very big on investment work," says one partner, commenting on a firm that does get its fair share of mandates in this area.

For example, a team consisting of Johan Terblanche and Marjorie Andre advised First State Investments UK and the Commonwealth Bank of Australia as to the reorganisation and closing of their EDIF and German Feeder Fund in the latter months of 2010. A second part of this deal entailed the team acting for them on the structuring and completion of a number of infrastructure assets both in the UK but also in Spain too. Thus far the funds have raised around €600 million, though this is less than half the intended target, which is €1.5 billion overall.

On another interesting deal Investment 11 with a value of €175 million.

Molitor's investment management practice has been involved in a seriously high profile mandate related to the Madoff case, where the American investment advisor Bernard Madoff was found to have been operating a Ponzi Scheme.

The firm is advising a set of confidential clients, including a major French bank and a similarly major European asset management company as well as private investors, as to the legal issues surrounding a Luxembourg fund that was defrauded to the tune of €1.25 billion.

OPF Partners has a team co-headed by experienced practitioner Francois Pfister, who is the main partner on the largest continuous fund being assisted by the firm. The Europe Direct Property Fund is, as the name suggests, a fund that looks to invest in European real estate and specifically is currently engaged with a residential project within Luxembourg. The asset value of this fund is said to be around €1.2 billion, with a long-term outlook for closing around 2016.

Fellow investment co-head Harold Prize has also been busy, primarily working on a SIF (specialised investment fund) related to renewable energy production.

"I haven't seen BSS on much for two or three years. They are invisible," says one partner bluntly, though the firm's investments team does do some work for clients on both Special Investment Funds and collective venture capital investment funds, or Sicars.

In terms of work, Bonn Schmitt Steichen has been active, mainly on more structural mandates. It is also the case that leading lawyers Luc Courtois and Corinne Philippe have been working, often as a team, on the most visible.

In one they are advising Banca Fideuram as to a wide restructuring of sub-funds and making arrangements for securities lending. Courtois on his own has also been advising UBI Banca as it looks to merge and rationalise certain funds that it manages. Both of these clients engage BSS for day-to-day matters and, as such, they are still ongoing.

Managing partner Alex Schmitt was also involved here, advising Generali Group as they looked to introduce some new, innovative products into the market.