Establishing a European private asset fund

Over the past number of years, Europe has become one of the most dynamic and developing regions globally for private asset strategies, with sustained growth across private equity, private credit, infrastructure and real estate.

The strategic question for global fund sponsors is no longer whether to establish a European fund, but how to structure a platform that is investable, scalable and defensible under increased regulatory, tax and investor scrutiny.

Within that context, Luxembourg and Ireland have emerged as the 2 dominant European fund domiciles, each offering a distinct and complementary set of advantages.

In this article, we share a practical, integrated framework, drawing on the expertise of our Luxembourg and Ireland teams, to help sponsors and managers make informed structuring decisions. Explore the insights below.

Establishing a European private asset fund

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Ongoing growth – fuelled by private credit

Industry databases such as Preqin and PitchBook indicate that Europe focused private capital assets under management have broadly doubled since 2018, from approximately €1.3 trillion to an estimated €3 trillion in 2025.

Much of this growth has been fuelled by private credit, with Europe now representing c.25–30% of global private credit capital.

Several structural forces underpin this growth:

Non-bank opportunities

Ongoing bank balance sheet and regulatory constraints have given rise to opportunities for non-bank lenders in corporate, real estate and infrastructure finance.
Interest rates

Higher interest rate environments since 2022 have increased returns available from floating rate private loans, with many European direct lending funds moving from pre 2022 gross yields in the mid single digits to high single or low double digit yield levels.
Reallocation of assets

Institutional portfolio reallocation from traditional public fixed income to private credit and other illiquid strategies, as European pensions and insurers target higher income and diversification. European investor sentiment has also shifted away from offshore jurisdictions which are still commonly used where there are only US investors.
Evergreen and semi-liquid

A shift toward evergreen and semi liquid structures, supported by regulatory initiatives such as ELTIF 2.0, which are designed to facilitate broader access to private assets, including for certain retail and wealth segments.

Against this backdrop of rapid expansion, the question is no longer whether to use a European structure for private assets, but how best to structure and domicile a European private assets fund.

Key considerations in this regard include:

Choice of jurisdiction and legal form
Optimal regulatory regime
Tax neutrality and ability to access double taxation
Substance requirements
Target investor base and distribution channels

Including the growing importance of wealth and semi-professional investors

Decision 1: Where should the platform sit?

Selecting the domicile is not simply a case of which jurisdiction is familiar or preferred – instead, the domicile is a strategic decision based on factors such as regulatory regime available, investor sentiment and tax neutrality.

Managers establishing private asset funds in Europe typically weigh Luxembourg and Ireland as the primary domiciles, however the UK has emerged as an alternative for certain strategies since the introduction of the Qualifying Asset Holding Company.

In practice, certain sponsors with a complex investor base or multi-strategy platform may in practice opt for a dual-jurisdiction approach, leveraging Luxembourg’s breadth of vehicle types alongside Ireland’s established strengths in US strategies (notably for private credit and loan-originating funds requiring US treaty access).

These jurisdictions are best understood as complementary rather than competing, and a growing number of platform mandates now span both.

The target operating model also needs to be considered:

Pan-European distribution

For example, if the intention is to establish a manager owned regulated entity to allow pan-European distribution, this will require in-country substance from a regulatory perspective, meaning broader factors such as availability of a skilled labour force, housing, etc. become relevant.
In-country substance

Whilst substance can be less of a factor where the operating model is to use a third-party management company, in-country substance may nonetheless be required to provide substance for tax purposes.
Consolidation within jurisdiction

A further trend worth noting is the consolidation of fund vehicles, AIFMs and SPVs within a single jurisdiction, allowing tax substance to be built on and aligned with regulatory substance rather than maintained separately across multiple locations.

This structural efficiency (sometimes referred to as a ‘one-jurisdiction hub’ approach) produces more defensible, qualitative substance positions and should be a key factor when selecting the domicile for a fund platform

Private asset funds are seldom as simple as having a single investor facing and asset holding fund vehicle – in practice there are usually a range of vehicles required to satisfy investor preferences, allow investment in different assets, facilitate carried interest arrangements, etc.

An ability to use the same jurisdiction for the various types of vehicles required (which often requires a broad range of legal options) is therefore also important in the context of ongoing operational efficiency.

Decision 2: What vehicle form aligns with investors’ expectations?

The legal framework usually boils down to two broad options – using an opaque vehicle or a tax transparent partnership, albeit there are some other types of vehicles such as trusts in certain jurisdictions.

The optimal legal framework is usually a facet of investor profile and the underlying strategy.

For example, a partnership such as an SCSp in Luxembourg or Investment Limited Partnership in Ireland provides greater flexibility in the context of governance, economics and fee / carried interest arrangements (usually via the LPA), whilst also providing tax transparency, which is preferred by certain investors.

This type of vehicle is usually more suitable for strategies such as private equity or where the fund sponsor requires tailored economics.

Conversely, corporate vehicles such as an ICAV in Ireland or a SICAV incorporated as a Sarl / SA / SCA in Luxembourg are typically tax-opaque, often used where a blocked structure is preferred, or where certain treaty / access or investor-specific considerations apply.

They can also provide flexibility to accommodate multiple strategies or vintages under one platform using an umbrella structure with different compartments or sub-funds.

A corporate vehicle is usually preferred where US exempt investors are likely or if there is any possibility of the fund strategy triggering a taxable nexus in any investment jurisdiction – the corporate vehicle usually serves to “block” and protect the investor from this risk.

A corporate vehicle is usually also preferable where tax treaty access is required, as partnerships cannot access treaties.

Given that most sponsors raise capital on a global basis across different investor categories, in practice there are usually a number of different investor facing vehicles needed to serve as the entry point or funnel for various investor profiles.

Whilst tax considerations can be important to this, one point is paramount above all – investor familiarity. If an investor is not familiar with a type of vehicle, the sales process will usually be more truncated than a circumstance where they have already invested in a particular type of vehicle.

In recent years, the trend towards evergreen or semi-liquid funds has also been a factor in the legal framework – closed-ended vintage funds usually favour partnership forms with defined commitment periods and distribution waterfalls, whereas evergreen fund can work better in a corporate form that can accommodate periodic subscription / redemptions and NAV based fee models.

The range of legal vehicles available across the key jurisdictions of domicile include the following:

Jurisdiction	Partnership	Corporate	Other
Luxembourg	SCSp SCS	SA S.à r.l. SCA	FCP
Ireland	ILP 1907 partnership	ICAV PLC Limited company (can elect into Section 110 regime)	CCF Unit Trust
UK	LP Private Fund Limited Partnership	Limited company (can elect into QAHC regime)

Decision 3: How is tax risk neutralized without over-engineering?

For private asset funds, a core design objective is typically tax neutrality at the fund level. All of the jurisdictions mentioned have legal entity types which can achieve this outcome, either through tax transparency or entity level exemptions / regimes.

However, fund level tax neutrality needs to be supplemented by the following:

Taxation of returns

Returns being taxed primarily in the hands of investors only.
Tax returns in jurisdiction

Investors not being required to file tax returns in any jurisdiction as a result of their investment in the fund.
Minimising charges

Minimisation of “dry” tax charges for investors (i.e. a cash tax liability which arises where the investor does not receive any cash return).
Minimising taxes

Minimisation of withholding and other taxes in the fund structure, including VAT in respect of management and other fees.
Alignment with rules

Alignment of structure with BEPS/ATAD, substance and anti avoidance rules.

In practice, each of the above considerations and related requirements will ultimately depend on investment strategy of the fund.

For example, in a private equity or infrastructure focused strategy, it is common to interpose local or regional holding entities (e.g. in the investment jurisdiction or a treaty favoured jurisdiction) to manage withholding and exit taxes.

However, many jurisdictions now require demonstrable substance (people, decision-making, premises) in entities claiming treaty benefits or preferential regimes. This affects where the fund management entity, directors, and key decision-makers are located, and how board processes are run.

Conversely, a private credit fund which originates loans with US borrowers normally needs to be capable of access US tax treaty benefits, which is why an Irish ICAV has become the vehicle of choice for such a strategy.

Compliance and reporting are also important with certain types of institutional investors expecting detailed tax reporting including breakdowns or income by source and character.

Decision 4: What level of regulatory friction is acceptable?

Regulated status is usually key in the context of securing investment from certain types of institutional investor.

In the context of private assets, the Alternative Investment Fund (AIF) regime provided by the European Alternative Investment Fund Managers Directive is the most suitable framework, as it provides a much broader and more flexible model than the UCITS regulatory regime.

Although the AIF regime is pan-European, there are some differences in how it has been implemented across Europe, in addition to differences in approach by regulators which can be important.

At a very broad level, Ireland offers high regulatory certainty and speed within a more rules driven framework whereas Luxembourg offers flexibility via a broader toolkit, especially with the RAIF regime.

At a more granular level:

Ireland
Luxembourg

In Ireland the Qualifying Investor AIF regime can be used across the common legal entity types (e.g. ICAV, ILP, plc) and is the go-to regime across private equity, private credit, infrastructure and real assets.

It involves the fund being fully regulated by the Central Bank of Ireland (CBI), which can be preferred by certain investor profiles (particularly institutional) and can nonetheless allow speed to market - if the AIFM and service providers are approved, the CBI typically authorises a new QIAIF within 24 hours of a complete filing.

In Luxembourg, the RAIF framework has become the go-to across private equity and private credit as it can allow quick speed to market given that the fund vehicle is not itself regulated – instead, it is indirectly regulated by virtue of having a regulated AIFM appointed as manager.

In practice, this means that no advance application to the CSSF in Luxembourg is required – instead, the fund can commence operations and make the required notification after the event.

In light of this, the RAIF-SCSp has become a popular approach for private asset funds. In tandem with the RAIF regime, it is also possible to have a fully regulated fund in Luxembourg with different options available within the framework of AIFMD including the SIF and SICAR (which is focused on risk capital).

Given the growing demand from retail investors for private assets over the past number of years, the ELTIF 2.0 regulatory framework has also become a popular regulatory approach in both Ireland and Luxembourg.

Similarly, the UCI Part II has been widely used in Luxembourg for evergreen type funds which are focused on retail investors.

In the context of private credit, AIFMD 2.0 is effective across Europe from 16 April 2026. This levels the playing field across European countries such as Ireland and Luxembourg in relation to the regulatory regime applicable to loan origination.

In light of this, the regulatory position will likely be a less relevant factor going forward for such a strategy.

Decision 5: How will capital actually be raised?

For any non-EU sponsor looking to establish a European product, a key question is usually how they can access European capital.

Where an AIF is EU domiciled and managed by an authorised EEA AIFM (or structured as a self-managed AIF, which is less common in practice), it can avail of the AIFMD passport to market to professional investors across the EEA following a notification process, without additional local authorisation being required.

In practice, new market entrants often rely on the regulatory status of a third party to enable distribution, in which case it is crucial to have a distribution strategy to maximise the ability to attract European investors.

It is possible to engage in “pre-marketing”, which allows provision of information or communication, on investment strategies or investment ideas, by an EU AIFM to potential professional investors domiciled or registered in the EU to test their interest in an AIF that is not yet established.

This allows investor appetite to be tested and the outcome can be factored into any distribution strategy.

Absent the AIFMD passport, distribution in Europe can be more challenging as access to EU investors is broadly restricted to reverse solicitation and national private placement regimes, which are a non-harmonised country specific solution.

Decision 6: What level of substance is defensible?

Regulatory substance

From a substance perspective, any corporate fund vehicle (or GP of a partnership) will require real substance – locally based directors and decision making in-jurisdiction (which usually necessitates travelling to board meetings).

At a fund manager level, there are a number of broad options which can be followed when establishing an EU fund, with the level of substance required from a regulatory perspective depending on which is chosen.

At a high level, the following options are available:

Use a third-party AIFM / management company

The sponsor / promoter appoints an external authorised AIFM (usually in the same jurisdiction as the fund vehicle) which legally acts as the AIFM of the fund, with an entity from the sponsor / promoter appointed as investment advisor or delegated portfolio manager.

In this scenario, any required regulatory substance is provided by the third party without the need to separately establish in-country substance from a regulatory perspective.
Own (in-house) AIFM

The fund sponsor / promoter forms its own EU AIFM which goes through the process to obtain regulatory approval.

In this scenario, real boots on the ground substance is usually required to support real decision making and risk management in the AIFM jurisdiction.
Self-managed AIF

In some structures (notably Irish ICAVs and certain Luxembourg corporate funds), the fund itself can be authorised as the AIFM – a “self-managed AIF”.

The board assumes AIFM responsibilities and typically delegates portfolio management. Whilst this approach doesn’t require any substance beyond directors, it has become less used as there is normally a requirement to outsource certain aspects to a third party, in addition to heightening regulatory scrutiny on the board.

For emerging managers, outsourced ManCo solutions have become an increasingly attractive structuring lever.

A third party can significantly reduce both the time-to-market and the ongoing operational burden, without compromising regulatory or investor-facing credibility.

Both Luxembourg and Ireland offer a competitive ecosystem of established ManCo providers capable of supporting this model across a range of asset classes and vehicle types.

Tax substance

Irrespective of which of the approaches above is adopted, depending on the strategy there can be a separate requirement for local in-country substance to support the tax position.

Tax neutrality at the fund level is indeed no longer sufficient on its own: sponsors must now demonstrate genuine economic substance at every level of the SPV structure where tax benefits or treaty access are claimed.

This means real decision-making by appropriately qualified directors, in-jurisdiction board meetings with documented deliberations, and governance frameworks that can withstand scrutiny from both tax authorities and institutional investors conducting due diligence.

For Luxembourg or Irish partnership structures using SPVs, the substance threshold has risen following ECJ decisions in the Danish beneficial ownership cases and the subsequent implementation of ATAD rules.

In both cases, the quality of governance documentation (board minutes, investment committee records, delegation agreements and substance policies) has become as important as the underlying legal structure.

Decision 7: Can the model scale profitability?

Cost and the surrounding service provider ecosystem are increasingly central to fund structuring decisions in Europe, particularly for private credit, infrastructure and other operationally intensive strategies.

Beyond headline management and performance fees, sponsors and investors are becoming more focused on the all in cost of ownership – including AIFM/ManCo charges, administration, depositary, audit, legal, loan servicing (where relevant) and data/technology – and on whether those costs are justified by the quality and depth of the local ecosystem.

For private asset funds, a well-developed ecosystem does more than keep costs competitive. In Ireland and Luxembourg, for example, administrators and depositaries with specialist private credit and real assets teams are now a prerequisite rather than a nice to have.

Accurate loan level accounting, complex waterfall and carry calculations, trade settlement for syndicated and bilateral loans, covenant and collateral monitoring, all require asset class expertise and technology that not every provider can offer at scale.

Similar considerations apply for infrastructure, real estate and secondary strategies, where valuation, cash flow modelling and regulatory reporting are highly specialised.

From a manager’s perspective, the choice of domicile is therefore increasingly a choice of ecosystem and cost base. Jurisdictions with a critical mass of administrators, depositaries, law firms, tax advisers and loan servicers experienced in the relevant asset class tend to deliver:

quicker speed-to-market,
lower operational and change management risk;
more credible support for regulatory and investor due diligence; and
greater ability to industrialise processes as AuM grows, driving down marginal costs per fund or strategy over time.

Conversely, locating a strategy in a market where specialist expertise is thin can lead to higher bespoke costs, operational constraints and scalability issues. Balancing competitive pricing with proven, asset class specific capability is therefore a key determinant of both investor confidence and long-term platform economics.

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