Luxury assets such as yachts, private jets, prime real estate, and rare collectibles have always been the preserve of the ultra-wealthy. However, the evolving landscape of structured ownership is transforming the way these high-value assets are managed, traded, and enjoyed. Increasingly, investors and high-net-worth individuals (HNWIs) are realizing the potential of securitising luxury assets through structured financial vehicles like Luxembourg funds, especially with the added flexibility of fractional ownership. This article explores why this approach benefits clients and why it’s an efficient and forward-thinking strategy for managing luxury assets.
The Appeal of Structured Ownership
Structured ownership refers to the financial arrangement where the ownership of an asset is divided into several parts or shares, allowing multiple investors to own fractions of that asset. This concept is particularly advantageous for luxury assets that come with high acquisition and maintenance costs, such as superyachts, private jets, or exclusive real estate.
In essence, structured ownership democratizes access to these assets while maintaining exclusivity. For clients, this means sharing the financial burden of owning these luxury items while enjoying the benefits without tying up an excessive amount of capital. At the same time, it allows for greater liquidity, as shares or units in these assets can be bought and sold more easily than the entire asset.
Securitisation and the Role of Luxembourg Funds
Securitisation involves converting an asset into a tradable financial product, such as a bond or equity stake, backed by the asset itself. Luxembourg has long been known for its robust legal and financial infrastructure, making it a top jurisdiction for asset securitisation. A Luxembourg fund, regulated under the country’s financial supervisory authority, offers a range of benefits for those looking to securitise their luxury assets.
- Efficient Tax Structure: Luxembourg offers a favorable tax environment for both individuals and corporations. This includes tax exemptions and efficient tax treaties with a wide range of countries, ensuring that investors benefit from optimized tax treatment when dealing with asset ownership through securitised structures.
- Flexibility in Asset Management: Luxembourg funds allow for the seamless management of multiple types of assets within a single legal framework. Whether it’s a jet, yacht, or luxury real estate, the flexibility provided by the Luxembourg fund structures—Specialised Investment Funds (SIFs), Reserved Alternative Investment Funds (RAIFs), and other vehicles—caters specifically to high-value assets and their complex management requirements.
- Enhanced Liquidity: Securitising assets through a Luxembourg fund creates a market for trading ownership shares, which enhances liquidity for investors. Instead of waiting for the entire asset to sell, fractional owners can sell their shares on secondary markets. This offers a key advantage in markets where luxury assets are not always easy to liquidate at short notice.
- Regulatory Safeguards: Luxembourg is known for its strong regulatory oversight and legal protections for investors. Funds domiciled in Luxembourg must comply with European Union (EU) regulations, providing an additional layer of security and transparency for clients.
Fractional Ownership: The Way Forward
Fractional ownership is becoming an increasingly popular model for luxury assets, particularly in sectors like yachts, private jets, and vacation properties. The traditional model of sole ownership is being challenged by the practicalities and benefits of owning part of an asset rather than the whole, especially for those who may not use it all year round.
Key Benefits of Fractional Ownership for Clients
- Cost Efficiency: The most obvious benefit is the cost savings. Purchasing a fraction of a luxury yacht or private jet significantly reduces upfront costs compared to full ownership. Maintenance, insurance, and operational costs are also shared among co-owners, making the ongoing expenses more manageable.
- Access to Luxury at a Fraction of the Price: Fractional ownership allows clients to access and enjoy high-value assets they may not have been able to afford otherwise. For instance, the cost of owning a private jet or yacht can be prohibitively high, but fractional ownership provides a more accessible entry point while maintaining the exclusive experience.
- Shared Usage, Unmatched Convenience: Through structured ownership, scheduling systems are typically put in place to ensure that all fractional owners have equitable access to the asset. This shared usage model, often facilitated by professional management companies, ensures the asset is available when needed while being cost-efficient when not in use.
- Portfolio Diversification: Fractional ownership also allows investors to diversify their luxury asset portfolios. Instead of tying up significant capital in a single yacht or jet, clients can spread their investment across multiple luxury assets. This approach not only diversifies risk but also allows investors to enjoy a variety of luxury experiences, from sailing the Mediterranean on a yacht to flying to exclusive destinations in a private jet.
- Resale Opportunities: With fractional ownership, the exit process is simplified compared to full ownership. Securitisation enables the sale of shares or units in the asset, making it easier for clients to liquidate their positions when necessary. The liquidity offered by securitised structures enhances the overall flexibility and attractiveness of this model for HNWIs.
Why a Luxembourg Fund Makes Sense for Fractional Ownership
By combining fractional ownership with the securitisation capabilities of a Luxembourg fund, clients benefit from enhanced flexibility, security, and tax efficiency. The structured framework of a Luxembourg fund provides a legally sound way to manage ownership stakes in luxury assets, while the securitisation process enhances liquidity, making it easier to buy, sell, or trade these stakes.
Furthermore, fractional ownership under a Luxembourg fund can be structured to cater to the unique needs of each investor, allowing for tailored exit strategies, management agreements, and ownership structures that maximize returns while minimizing risks.
Conclusion
For clients seeking to invest in luxury assets, structured ownership through securitised Luxembourg funds is an innovative and highly beneficial approach. It not only provides access to exclusive assets like yachts and jets at a fraction of the price but also enhances liquidity, optimizes tax efficiency, and diversifies the risk involved in luxury asset ownership. As the demand for luxury experiences grows, fractional ownership and securitisation represent the future of how high-value assets will be managed and enjoyed by discerning investors.
