Dedicated fund

Private management combined with life insurance

Your clientele includes a number of wealthy investors. Naturally, the latter seek the best in the management of their assets.

They have very particular demands as regards the management of their assets and underlying financial assets in which they wish to be able to invest.

They are looking for a bespoke management that will take their specific expectations into account.

One of their conditions may be that their capital is managed by a particular manager whose skills and style of management they rate highly.

Similarly, many of these wealthy clients ask you to find an optimum solution for transfer of their assets.

It is very difficult to meet all these demands with one single product. Certainly, solutions that are tailored to the needs of these clients can be found with private banks but without the advantages inherent in life insurance policies as regards the transfer of assets or investment.

We suggest adding our dedicated fund solution, which meets all these requirements, to your product range.

The dedicated fund is managed in entirely independently by an asset manager (authorized asset manager). This also ensures bespoke management of your fund in accordance with the rules and the management strategy determined beforehand with your client.
The investor has access to a type of investment that goes well beyond that of conventional collective investment funds of the standard multi-fund contract type as the manager is free to invest directly in shares, bonds, unit trusts, alternative funds and many other financial instruments. The distribution of assets, like their eligibility, must always comply with the prudential regulations issued by the Commissariat aux Assurances of Luxembourg in order to best protect the interests of the investor.

The dedicated fund is invested in a life insurance contract and therefore benefits from all of the advantages associated with this type of product, in particular from the point of view of taxation and inheritance.

Dedicated funds combine the flexibility and advantages of private management while keeping your client's assets within the advantageous framework of life insurance. This enables you to offer wealthier clients a fully integrated solution which offers a life insurance policy, bespoke management and the expertise of an asset management professional.

Principles of the dedicated fund

This solution is open to all investors with at least EUR 250 000 invested in their contract.

Under the law in Luxembourg, dedicated funds are also internal funds but with a one major difference: this fund can only be the fund of a single contact, hence its description, dedicated fund.

The dedicated fund is also the property of the insurance company and the assets it comprises are deposited in a separate account with a depositary bank. It is managed by a specialised third party in compliance with the investment rules stipulated by the C.A.A. in Appendix 1 of Circular 04/8. It should be noted that these investment rules become more flexible in accordance with the amount invested under the contract.

There are 3 categories of dedicated funds, each of which have their own investment limitations as detailed in Appendix 1 of the circular.

Fund type A, invested via a contract with a value of over EUR 250 000 yet under EUR 500 000.

Fund type B, invested via a contract with a value under EUR 2 500 000.

Fund type C, invested via a contract with a value of over EUR 2 500 000.

In the case of a type C dedicated fund, only the choice of assets is regulated, investment limits no longer apply.

Determination of the management strategy is a fundamental prerequisite for the creation of bespoke dedicated management as all the management principles of the fund will be derived from this.

In practice, determination of this management strategy is frequently the result of common collaboration between the future manager of the fund, the partner and the client. Thus, together you precisely determine the client's management objectives as regards the degree of his or her aversion to risk, and his or her financial and personal objectives.

Your client then informs the company of the investment strategy established via a management mandate. The company then entrusts this management to the desired manager.

The latter will employ all the know-how, expertise and financial information processing tools at his disposal in order to achieve the objectives set strictly within the context of what has been agreed and in compliance with the provisions in Luxembourg regarding investment in dedicated funds.

Naturally, the strategy employed can be reviewed over time in order to develop the dedicated fund at the same rate as the policyholder's personal objectives.

Privileged information

Asset management, as we understand it, cannot be considered without regular high-quality informative monitoring. The holder of a dedicated fund is regularly supplied with privileged information enabling him or her to follow the management of said dedicated fund. We will provide him or her with clear and concise informative reports.

Arrangement of funds

The company has established the necessary structures and procedures for swift opening of a dedicated fund for your client. However, the creation of a dedicated insurance fund is always a special case as we are dealing with many players (bank, manager, client, partner distributor, insurance company). For this reason it is necessary to contact the company beforehand in order to find out the procedure to be followed and obtain the necessary components to ensure the assembly phase proceeds smoothly:

"client-company" management mandate
information note to be adapted if necessary
procedures for the premium deposit
...

The time required to set it up is naturally shorter if you choose to work with one of the asset managers who already operates as "dedicated fund" manager for the company. If your client wishes to work with a specific manager known to them or who already manages part of their assets, the company offers you the opportunity to maintain this relationship. The only prerequisite is that the manager must be accredited as a management firm by their supervisory authorities. The time required to set up your solution will depend on the relationship to be established between the manager and the company's depositary bank.

Similarly, the framework for setting up the "dedicated funds" solution was established with a specific number of depositary banks and the arrangement facilities only apply within this particular framework. Any project that entails entering into a relationship with another bank first of all depends on prior agreement by the company and also requires to undertake procedures that could turn out to be very long.