Closing a fund can be just as complex as setting one up. Whether the decision comes from strategic changes, investor withdrawals or regulatory requirements, liquidation requires careful planning and precise execution. Without the right guidance, managers can easily encounter unnecessary delays, costs and reputational risks.
Here are five common pitfalls to avoid when closing a fund.
1. Underestimating regulatory requirements
Leading international financial centres, such as Luxembourg, tend to have robust regulatory environments. Too often, managers assume the process will be straightforward and overlook formal steps. In the case of Luxembourg, this would include approvals from the CSSF and notarial filings. Skipping these requirements, or leaving them too late, can result in delays and extra costs.
Tip: Work with an experienced liquidation partner who can anticipate local compliance requirements and coordinate filings from the outset.
2. Poor asset realisation planning
Liquidating assets is rarely as simple as selling everything in one go. Illiquid holdings, complex instruments or hard-to-value assets can significantly slow down the process. If assets aren’t handled carefully, the value recovered may also be lower than expected.
Tip: Plan ahead for asset disposal. Identify illiquid assets early and ensure they are liquidated – through secondary market sales, managed wind-downs or other appropriate means – before the formal opening of the liquidation.
3. Overlooking hidden liabilities
A common stumbling block in fund closures is the discovery of unexpected liabilities: unpaid service provider fees, outstanding tax obligations or investor claims. If these aren’t settled, they can delay the entire liquidation process.
Tip: Carry out a thorough review of liabilities before beginning the liquidation. A clear audit avoids surprises later.
4. Failing to communicate with stakeholders
Closing a fund is not just a technical process – it also involves people. Investors, regulators, auditors, banks and service providers expect timely, transparent communication. Poor communication can lead to mistrust, disputes or reputational harm.
Tip: Keep stakeholders informed throughout the process with clear updates and timelines.
5. Rushing final accounts and reporting
Final accounts and liquidation reports are the official end of the process. Errors or omissions at this stage can trigger additional queries from auditors and regulators, delaying dissolution.
Tip: Treat final reporting as a critical step. Allocate time for a careful review and ensure full compliance with jurisdictional requirements.
How we can help
Closing a fund is a delicate balance of compliance, efficiency and stakeholder management. With the right expertise, managers can avoid these pitfalls and ensure a smooth process.
At IQ-EQ Luxembourg, we combine local knowledge with global experience to guide clients through every stage of liquidation. If you’re considering closing a fund, speak to our team about how we can help you achieve a compliant and efficient outcome.
