Investment Fund Licensing 2026: Luxembourg, Ireland, and Cayman Compared

These three jurisdictions manage trillions in fund assets between them, but they are not interchangeable. Each serves a different part of the market, and choosing wrong costs more than just fees.

Luxembourg, Ireland, and the Cayman Islands collectively administer the majority of the world's investment fund structures. Luxembourg and Ireland dominate European regulated funds. The Cayman Islands remains the default for hedge funds and offshore private equity. The choice between them depends on what you are raising, from whom, and where you plan to distribute.

UCITS: Luxembourg versus Ireland

UCITS (Undertakings for Collective Investment in Transferable Securities) is the gold standard for retail fund distribution in Europe and increasingly globally. Both Luxembourg and Ireland offer UCITS licensing, and the two jurisdictions hold roughly equal market share by assets under management. The differences are in the details.

Luxembourg is administered by the CSSF (Commission de Surveillance du Secteur Financier). Luxembourg UCITS benefit from the broadest global recognition: over 70 countries accept Luxembourg UCITS for distribution. The CSSF approval process typically takes 3 to 4 months for standard fund structures. Luxembourg also offers the widest range of legal forms for UCITS, including SICAV (variable capital company), FCP (contractual fund), and SICAF (fixed capital company).

Ireland is regulated by the Central Bank of Ireland. Irish UCITS have strong distribution reach, particularly in the UK (post-Brexit, Irish UCITS maintained access through the Temporary Permissions Regime and subsequent recognition). Ireland's approval timeline runs 4 to 6 months. The legal structures are narrower (primarily ICAV, unit trust, or investment company), but the ICAV in particular has become popular for its tax transparency and structural flexibility.

For most promoters, the choice comes down to distribution strategy. If your target investors are in Asia, the Middle East, or Latin America, Luxembourg's broader recognition gives it an edge. If your primary market is the UK or you want an English-language legal and operational environment, Ireland is the practical choice.

AIFMD frameworks: alternative fund licensing

The Alternative Investment Fund Managers Directive (AIFMD) governs non-UCITS funds in the EU, covering hedge funds, private equity, real estate, infrastructure, and credit funds. Both Luxembourg and Ireland have well-developed AIFMD regimes.

Luxembourg AIFs come in several forms. The RAIF (Reserved Alternative Investment Fund) is notable because it does not require CSSF product-level approval, only registration, provided it is managed by an authorized AIFM. This speeds up launch significantly (weeks rather than months). The SIF (Specialised Investment Fund) and SCSp (special limited partnership) are also widely used. Luxembourg's limited partnership structures have improved substantially since 2013 reforms, making it viable for PE/VC fund structures that previously defaulted to Cayman.

Irish AIFs use the ICAV or qualifying investor alternative investment fund (QIAIF) structures. The QIAIF can be authorized within 24 hours if using a pre-approved template and an authorized AIFM, which is genuinely fast by regulatory standards. Irish QIAIFs are popular for real estate and credit strategies, benefiting from Ireland's extensive tax treaty network and OECD-compliant tax regime.

Cayman Islands: the offshore default

The Cayman Islands Monetary Authority (CIMA) oversees what remains the world's leading offshore fund jurisdiction. Cayman is home to approximately 12,000 registered funds, overwhelmingly serving the hedge fund and private equity industries.

Segregated Portfolio Companies (SPCs) allow multiple investment strategies within a single legal entity, with assets and liabilities legally segregated between portfolios. This is valuable for fund platforms, multi-strategy managers, and insurance-linked securities. SPCs cannot be replicated in Luxembourg or Ireland with the same structural simplicity.

Exempted Limited Partnerships (ELPs) are the standard vehicle for Cayman PE/VC funds. The structure is familiar to US institutional investors and their counsel, which reduces negotiation friction. Limited partnership agreements follow well-established market terms, and Cayman courts have a deep body of case law on fund disputes.

Cayman's advantage is speed and familiarity. A standard ELP can be established in days. There is no product-level regulatory approval for most fund types (registered funds file with CIMA but do not require pre-approval). For managers raising from US institutional investors, Cayman remains the path of least resistance.

Management company requirements

Every regulated fund needs a management company (ManCo) or must be self-managed. The requirements differ significantly.

Self-managed funds handle portfolio management, risk management, and compliance internally. This requires the fund entity itself to be authorized as an AIFM (in the EU) with minimum capital of EUR 300,000 plus additional capital based on AUM above EUR 250 million. Self-management works for larger managers with established teams but is impractical for emerging managers.

Third-party ManCos provide AIFM authorization as a service. Luxembourg has a mature ManCo market with dozens of providers. Ireland has fewer but growing options. Fees typically run EUR 50,000 to 150,000 annually depending on fund complexity and AUM, plus basis points on NAV (usually 2 to 5 bps). ManCo due diligence has intensified since ESMA published guidance on substance requirements; a ManCo must demonstrate genuine decision-making capability, not just rubber-stamp investment decisions made elsewhere.

Cayman does not require an authorized management company for most fund structures. The investment manager (often a US or UK entity) manages the fund under an investment management agreement. This eliminates ManCo cost entirely but means the fund lacks EU marketing passport rights.

Setup costs: realistic numbers

Official fee schedules understate total costs significantly. Here is what firms actually spend:

Luxembourg UCITS: CSSF authorization fee EUR 4,000 to 5,000. Legal structuring EUR 30,000 to 80,000. Depositary setup EUR 10,000 to 20,000 plus ongoing basis point fees. Fund administration setup EUR 10,000 to 15,000. Third-party ManCo (if used) EUR 50,000 to 100,000 first year. Total first-year cost: EUR 150,000 to 300,000 before any distribution expenses.

Ireland QIAIF: CBI authorization fee EUR 3,000 to 4,000. Legal structuring EUR 20,000 to 50,000. Depositary fees similar to Luxembourg. Fund administration EUR 8,000 to 15,000 setup. Total first-year cost: EUR 100,000 to 250,000. Irish structures tend to be 10 to 20% cheaper than Luxembourg equivalents for comparable fund types.

Cayman ELP: CIMA registration fee $4,268 (standard registered fund). Legal structuring $30,000 to 100,000 (partnership agreements for PE/VC funds can be extensive). Fund administration $15,000 to 30,000 setup. No ManCo cost. Total first-year cost: $60,000 to 150,000. Cayman is the cheapest option for straightforward structures.

Ongoing compliance costs

Annual running costs diverge more than setup costs:

• Luxembourg: CSSF annual fee EUR 4,000+, depositary fees 1 to 5 bps of NAV, administration fees 3 to 8 bps, audit EUR 15,000 to 40,000, ManCo fees EUR 50,000 to 150,000, regulatory reporting (AIFMD Annex IV, SFDR, taxonomy) EUR 10,000 to 30,000. Total ongoing: EUR 150,000 to 400,000+ annually for a mid-sized fund.
• Ireland: Similar structure to Luxembourg but typically 10 to 15% lower. CBI reporting requirements are substantial but slightly less layered than CSSF. Total ongoing: EUR 120,000 to 350,000+ annually.
• Cayman: CIMA annual fee $4,268 to $6,098, administration fees 5 to 10 bps, audit $15,000 to 50,000, minimal regulatory reporting. Total ongoing: $50,000 to 150,000 annually. The cost advantage is significant for smaller funds.

Substance requirements

EU substance rules have tightened considerably. Both Luxembourg and Ireland require genuine operational presence for fund management entities. ESMA's 2024 guidance on substance expectations specifies that AIFMs and UCITS ManCos must have senior management physically present, with portfolio management and risk management functions performed locally (not merely supervised from another jurisdiction).

Luxembourg requires at least two conducting officers resident in Luxembourg for authorized AIFMs. Ireland requires at least two designated persons with Irish residence. Both jurisdictions have rejected applications and withdrawn authorizations where substance was deemed insufficient.

Cayman has no equivalent substance requirements for funds (though the investment manager in the US or UK has its own regulatory obligations). This remains a key advantage for managers who want a fund vehicle without establishing a European office.

Choosing the right jurisdiction

For retail distribution in Europe and globally: Luxembourg UCITS, with Ireland as a close alternative for UK-focused distribution.

For European institutional alternative funds: Luxembourg RAIF or Irish QIAIF, depending on distribution targets and cost sensitivity.

For hedge funds with US institutional investors: Cayman ELP remains the default. The legal framework is familiar, the costs are lower, and US allocators expect it.

For PE/VC funds: Cayman for US-centric fundraising. Luxembourg SCSp for European fundraising with AIFMD passport. Ireland is gaining traction but still trails Luxembourg for PE/VC structures.

For real estate funds: Ireland (ICAV structure with tax treaty access) or Luxembourg (SIF or RAIF). Cayman for non-European investors only.

The worst mistake is choosing a jurisdiction based solely on setup cost. A Cayman fund that cannot be marketed to European institutional investors under AIFMD national private placement regimes may cost less to establish, but the fundraising limitations can be far more expensive than the savings. Match the structure to the investor base, not the fee schedule.