On February 12, 2025, InFiNe, in collaboration with its member CMS Luxembourg, hosted a Knowledge Sharing Event (our monthly insightful gathering) on “Designing Effective Fundraising Structures for Impact Projects.”
The session provided an in-depth exploration of fundraising structures available for impact-driven initiatives, ranging from low-regulation exemption regimes to fully compliant AIFMD structures and securitisation vehicles as well as potential “retailisation” solutions.
Understanding the regulatory landscape and selecting the appropriate structure based on the target investor base and project requirements is key for successful impact fund launch and management.
With 28 participants joining both in person at Maison de la Microfinance and virtually, the event facilitated a rich discussion on the complexities of fundraising structures for impact projects. The CMS Luxembourg team outlined the critical considerations in selecting appropriate fundraising frameworks based on the regulatory landscape, investor base, and project requirements.
CMS team started by providing an overview of the impact projects and their specific characteristics, by mentioning that these projects are highly sensitive to costs, and efficiency is crucial. Further, they are characterized by a complex capital structure: impact funds often feature a blended finance structure, which requires careful structuring at both the capital and investment strategy levels.
The speakers introduced the available options of fundraising structures:
1. Non-regulated sub-threshold AIF structured as a société en commandite spéciale (SCSp)
The first option presented was the non-regulated sub-threshold AIF structured as a société en commandite spéciale (SCSp), the exemption regime, of which the presenter highlighted some of the key specificities: ideal option for small or first-time fund managers; General Partner (GP) registered as AIFM with the Luxembourg regulator, the CSSF (Commission de Surveillance du Secteur Financier), which allows for the management of the structure without the need to appoint a fully authorised AIFM and a depositary bank, which comes with higher costs. The limitation pointed out was that this structure does not benefit from the EU marketing passport, which allows the fund’s shares, units or partnership interests to be marketed to investors across the EU, and therefore the necessity to rely on national placement regime rules on a case by case basis for the purpose of distributing the fund.
2. Non-regulated AIF structured as a SCSp with a non-EU AIFM
The second option showed was the non-regulated AIF structured as a SCSp with a non-EU AIFM. This option allows non-EU sponsors to manage the Luxembourg structure without being captured by AIFMD regulation making it notably more attractive for managers located in the UK or US. The limitation highlighted was that this option does not benefit from the EU marketing passport.
3. Fully AIFMD-compliant structure
The third option presented was the fully AIFMD-compliant structure, with the appointment by the GP (which is not registered with the CSSF) of a third-party authorised AIFM (Alternative Investment Fund Manager). This is a standard structure for fund managers that ensures full regulatory compliance and which benefits from the EU marketing passport, allowing it to be marketed across the EU.
4. Fully AIFMD-compliant structure and Semi-regulated or regulated structure
The fourth option described was the fully AIFMD compliant structure, framed on top of it, with a semi-regulated or regulated product (e.g. SIF/RAIF/SICAR/Part-II), managed by an authorised AIFM. One of the advantages is that the fund can be structured as an umbrella vehicle, offering the possibility of having different compartments with specific investment strategies. The advantage is that the umbrella structure permits to achieve a “platform effect” for investors and impact projects, which benefits from the EU marketing passport, allowing it to be marketed across the EU.
As key considerations for fund managers, the CMS team pointed out that the choice of structure is also highly dependent on the target investor base. Fund managers must define whether they are targeting professional investors or a broader audience (such as retail investors). The alternative investment fund structuring options above-mentioned being open for professional investors only, the CMS team highlighted that structuring alternatives for impact projects may also be found in capital markets or securitisation solutions.
The presenters continued the presentation presenting alternative options available, specifically the securitisation vehicles. These vehicles provide an alternative to traditional investment funds and are increasingly used in impact projects, particularly for debt strategies.
Securitisation vehicles allow funds to acquire and spread risk across multiple investors, making them an attractive option for clients looking for quicker time-to-market and less regulatory burden. The presenters highlighted the key features of such options: they are typically not regulated (only less than 30 regulated in Luxembourg), allowing for faster market entry; they can be listed on the stock exchange, adding another layer of accessibility for investors; ideal for identified or identifiable projects; can also create compartments for segregation of assets; generally require fewer service providers: only the need for an auditor, a bank and a corporate service provider in most cases.
To summarize, the speakers stressed some key differences between investment funds and securitisation vehicles, for fund managers to carefully consider which structure best suits their capital raising strategy and target investor base. The presenters commented that the investment funds are more structured from the top-down, with a focus on fund management and investor returns; securitisation Vehicles are more passive in nature instead, typically investing in debt rather than equity, and are used for a specific purpose or set of assets. Securitisation vehicles are often seen as issuing debt instruments, whereas investment funds are typically equity-focused, which may impact the investor’s tax treatment.
The presenters further stated that some public organizations may be less inclined to invest in securitisation vehicles due to regulatory constraints, which should be kept in mind when structuring impact projects.
To conclude, responding to some questions from the audience about the (i) costs of setting up in Luxembourg, (ii) the impact of these vehicles and (iii) bonds and investors requests, the CMS teams commented that (i) securitisation vehicles incur, in principle, fewer costs than a regulated alternative investment fund structure, due to the reduced need for service providers, making them an attractive option for cost-conscious projects; (ii) securitisation is not inherently an investment strategy; it requires specific projects to be identified beforehand for investment; (iii) securitisation vehicles often issue bonds and typically there is no difference on the type of investors.
This session reinforced the understanding of the importance of strategic structuring in impact fundraising, equipping attendees with valuable knowledge to make informed decisions about their financial frameworks.
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