US fund managers using “access vehicles” to indirectly onboard private wealth in unregulated Luxembourg funds – New York office Snippet

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12-02-2025

Under an EU marketing passport, US private fund managers can market their unregulated Luxembourg alternative investment funds (AIF) to EU retail investors that pass a suitability test. Such AIF must be managed by an EU authorized AIF manager in order to have access to the passport. Alternatively, marketing to EU and to non-EU retail investors of a Luxembourg unregulated AIF may also be possible if the local marketing rules permit it.

The above framework is not widely used. Private fund managers are used to dealing with a relatively limited number of investors. Allowing a high number of retail investors that come in with smaller tickets would substantially increase the managers’ costs, risks and administrative burden. Moreover, it would require an overhaul of their investor relation teams, which are used to dealing with professional investors only.

Specialist providers, such as private wealth sections of banks, offer a solution. They offer “access vehicles”, which are (EU) feeder entities that pool retail investors. Those vehicles commit to the Luxembourg AIF for an amount equal to the retail capital they manage to attract. This model has gained substantial traction over the past several years and is a sought-after solution by US fund managers to boost their EU capital volumes. Access vehicles are usually EU (unregulated) AIFs which are passported to EU retail investors that have “opted-up” (see our previous Snippet) as professional investor. Other retail investors can get access to the vehicle if permitted under the applicable local marketing rules.

The underlying unregulated Luxembourg master AIF only faces the access vehicle, and the concerns outlined in the prior paragraph are therefore dealt with by the equipped organization of the specialist provider. To anticipate on the needs of retail investors, the specialist providers may accommodate specific liquidity strategies – e.g., allowing the transfer of their interest in the access vehicle at a discount to designated secondary funds managed by the same specialist providers or by third parties.

Next to a management fee, the specialist providers usually charge their investors a one-off fee to be onboarded in the access vehicle. Like any other investor in the underlying Luxembourg unregulated AIF, the access vehicle will bear a carried interest and management fee taken out at the level of the Luxembourg unregulated AIF.

Securing access for retail investors to private markets is thus more costly than for professional investors (which can invest directly in the AIF, without the need for an access vehicle). The additional cost layer is justified by the need for an access vehicle which is a practical a “must have” to channel retail wealth to the private markets.

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