Alfi reveals how to service Islamic funds in Luxembourg
11 December 2012 Luxembourg
Image: Shutterstock
The Association of the Luxembourg Fund Industry (ALFI) published a collection of best practices for setting-up and servicing Islamic funds to provide a greater level of understanding of a growing market sector.
Marc Saluzzi, chairman of ALFI, said: “2012 has been a very active year for the Luxembourg Islamic finance community with several new Shariah-compliant funds launched. Luxembourg currently ranks No. 5 worldwide and first in Europe in the number of Shariah-compliant domiciled funds, at 41 funds with €4 billion in assets under management."
The best practices also give a high level indication of whether Islamic finance instruments are compatible with Luxembourg UCITS laws. A number of Shariah-compliant funds have adopted the UCITS structure, given the focus on investor protection of UCITS funds and the fact that UCITS funds have rigorous investment policies that accommodate the principles underlying Islamic finance.
Saluzzi continued: “Setting-up a Shariah-compliant UCITS fund in Luxembourg, opens the doors of the more than 70 countries around the world in which Luxembourg UCITS funds are currently distributed."
“There are also a number of Shariah-compliant private equity and real estate structures established in Luxembourg and the European distribution passport created by the AIFM Directive will offer new opportunities for these products.”
In January 2010, the Luxembourg direct tax authority published a circular on Islamic finance, clarifying the tax treatment of murabaha contracts and sukuk transactions. This was followed, in June 2010, by a circular from the indirect tax authority clarifying the treatment of murabaha and ijara contracts.
Marc Saluzzi, chairman of ALFI, said: “2012 has been a very active year for the Luxembourg Islamic finance community with several new Shariah-compliant funds launched. Luxembourg currently ranks No. 5 worldwide and first in Europe in the number of Shariah-compliant domiciled funds, at 41 funds with €4 billion in assets under management."
The best practices also give a high level indication of whether Islamic finance instruments are compatible with Luxembourg UCITS laws. A number of Shariah-compliant funds have adopted the UCITS structure, given the focus on investor protection of UCITS funds and the fact that UCITS funds have rigorous investment policies that accommodate the principles underlying Islamic finance.
Saluzzi continued: “Setting-up a Shariah-compliant UCITS fund in Luxembourg, opens the doors of the more than 70 countries around the world in which Luxembourg UCITS funds are currently distributed."
“There are also a number of Shariah-compliant private equity and real estate structures established in Luxembourg and the European distribution passport created by the AIFM Directive will offer new opportunities for these products.”
In January 2010, the Luxembourg direct tax authority published a circular on Islamic finance, clarifying the tax treatment of murabaha contracts and sukuk transactions. This was followed, in June 2010, by a circular from the indirect tax authority clarifying the treatment of murabaha and ijara contracts.
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