Introduction to Luxembourg SICAV and regulations
28 November 2022 _ News
What is a SICAV?
A SICAV (Société d'Investissement à Capital Variable, translated in English as “investment company with variable capital”), is an open-end Luxembourg Investment Fund structure popular especially in western European countries.
The SICAV can have an umbrella structure when within the SICAV there are several different sub-funds.
The value at which the Shares of a sub-fund are exchanged is equal to the Net Asset Value of the sub-Fund, also called NAV (Net Asset Value, the net value of assets less its liabilities, divided by the number of shares outstanding). Basically, the NAV is the price at which the shares of a sub-fund can be purchased or sold. As NAV is calculated at the end of each trading day, based on the closing market prices of the portfolio's securities, it is called “Variable capital.”
The purpose of a SICAV is to invest in liquid financial assets, diversifying investment risks and allowing investors to benefit from the results of managing their assets.
In practice, different investors can invest in a SICAV, and the money collected is passed on to a professional Fund Manager, which buys, sells, or swaps bonds, equities, etc., managing the Fund's portfolio daily to obtain the best possible return for investors while following the SICAV’s investment strategy.
SICAV Funds, when incorporated under the Undertakings for the Collective Investment of Transferable Securities (UCITS) directive, can be market across the European space under a harmonized sale & management framework. And for that reason UCITS Funds are mostly targeted to retail investors, while the SICAVs incorporated under the Alternative Investment Fund Directive, which in Luxembourg are mainly represented by the SICAV incorporated under the Luxembourg SIF or RAIF law, are mainly reserved for institutional investors.
What are the characteristics of a SICAV?
- Equity Funds are usually high-risk profile Funds which aim for comparatively long-term profitability.
- Bond Funds are much more secure and the main target of this type of investment are average returns.
- Diversified Funds are a mix of equities and bond to have the highest capital gain.
- Money market Funds are usually short-term Funds with low risk and consequently lower returns.
What are the differences between a SICAV & a SICAF?
The primary difference between a SICAV & a SICAF is that SICAV is an investment company with a variable capital and SICAF is an investment company with a fixed capital. However, the second difference between the two lies in the fact that how the two companies are formed. A SICAV company is open-ended collective meaning the shares owners can buy or sell the shares of the fund at any time. SICAF on the other hand is a closed fund meaning it can be only bought when the fund is created and only sold when the fund is closed.
Why should you choose a Luxembourg SICAV?
Luxembourg is the second largest Fund market in the world after the United States of America in terms of assets under management, with over five trillion assets under management. The factors that have favored the expansion of the Luxembourg Funds market are certainly linked to:
- Stability of the political and social system.
- Favorable regulation of the sector and facilitated taxation.
- High concentration of financial sector professionals with a high level of internationalization.
- Specialization in cross-border distribution of Funds.
Pharus Luxembourg SICAV & its competitive advantage.
- Pharus Sicav Basic Fund, a flexible sub-fund dynamically exposed to mainly equity markets in the Euro area. It aims at identifying individual stories that have not yet valued growth in their stock market prices, of which the Italian market is rich. Active management and the ability to vary the portfolio composition have allowed the Fund to demonstrate resilience over the years, currently boasting a track record of over 15 years.
- Pharus Sicav Best Regulated Companies invests in companies specialized in infrastructures within regulated sectors (electricity transmission and distribution, water and gas transport, gas storage, and re-gasification). These services are strategic and socially relevant and often operate in a monopoly regime. The sector has a low correlation to the economic cycle, and companies have very stable earnings growth and high cash flows, translating into solid and sustainable dividend yields over time. The sub-fund also enjoys a AAA ESG rating, the highest according to MSCI ESG Research data and methodology.
- Pharus Sicav Conservative is a balanced sub-fund with a prudent orientation to steadily increase capital in the medium-long term. The Equity component can vary from 20% to 40%. The remaining part of the portfolio is invested in bond asset classes decorrelated to Equity.
- Pharus Sicav Equity Leaders invests in leading global companies, as leaders can more easily provide lasting growth in earnings, given their competitive and evolutionary advantage. The selection approach aims to identify companies with earnings growth above the market average which is not accurately reflected in the current valuation.
- Pharus Sicav Liquidity is the first sub-fund launched by Pharus, with more than 20 years of track record. It invests in Short Maturity corporate bonds with an initial or residual maturity of no more than 3 years and 20 days. The sub-fund offers an excellent alternative to liquidity with an annualized yield since its launch of 1.2%.
- Pharus Sicav Medical Innovation invests in equity or similar securities issued by biopharmaceutical companies, mainly belonging to the American small-cap niche, characterized by strong growth trends, and embracing technological innovation.
- Pharus Sicav Target’s the objective is to ensure a high coupon flow by investing in a highly diversified portfolio of fixed-income securities, mainly high-yield bonds with an average rating of BB-. The Quantamental approach, aimed at optimizing the risk-return ratio, since the sub-funds launch has guaranteed the distribution of a high annual coupon.
- Pharus Sicav Trend Player applies evolutionary strategies to capture the market and trend changes. It identifies market momentums and potential industry trends which allows the selection of individual stories. The sub-fund currently focuses on Technology, which has 3 times the market earnings growths, Electric Mobility, with double margins compared to traditional cars, and Telemedicine.
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