Why Fund Structure Still Matters: Scaling European VC

In the dynamic landscape of European venture capital (VC), a new cohort of Emerging Markets (EMs) – for example markets like Lisbon, Berlin, Warsaw, Barcelona and beyond – is making its presence felt. While innovation, talent and entrepreneurial energy in these EMs are undeniable, one constant remains: fund structure still matters. For VC managers operating in these maturing markets, the strategic choice of fund domicile continues to play a decisive role in fundraising success, operational efficiency, and long-term scalability.

At Belasko, we’re speaking to more and more managers from these EMs, many of whom are exploring opportunities to expand beyond their local markets. Often, local fund domiciles – while cost effective – are constrained by regulatory inflexibility, lack of speed to market, limited-service ecosystems, and a lack of familiarity with global LPs. As these managers scale, they’re increasingly looking to more established jurisdictions (like Luxembourg or the Channel Islands), which offer the credibility, adaptability, and the infrastructure needed to support cross-border fundraising ambitions. So, here lies the dilemma shared by many growth-stage managers across emerging European ecosystems:

Should we stay local, or look to an established jurisdiction (like Luxembourg or the Channel Islands)?

Why the jurisdiction debate is still relevant

In theory, a good investment story should travel. In practice, LPs don’t just back deals — they back platforms. For institutional investors from the US, Nordics, and Benelux, the fund's jurisdiction remains a critical proxy for governance standards, regulatory rigour, and exit readiness.

Jurisdictions like Luxembourg and the Channel Islands (Jersey and Guernsey) remain enduringly popular not because of prestige, but because of trust, familiarity, and structural adaptability. Jersey and Guernsey are continually enhancing their fund regimes (JPF and PIF) to reinforce their positions as leading financial centres. Notably, as of 6 August 2025, further enhancements to the JPF regime will deliver greater flexibility, faster approval times, and a broader range of eligible investor categories[1].

These jurisdictions have well-established fund regimes designed to meet the expectations of sophisticated LPs while accommodating increasingly complex strategies.

Emerging Markets vs. established fund domiciles

EMs across Europe have introduced local fund structures to stimulate domestic VC activity. These include simplified fund vehicles with lower costs and regulatory entry points. However, when compared with established regimes in Luxembourg and the Channel Islands, clear trade-offs emerge:

[1] https://www.alfi.lu/en-gb/pages/industry-statistics/luxembourg

[2] https://www.guernseyfinance.com/industry-resources/member/beauvoir-group/guernsey-s-private-investment-fund-regime-gets-a-major-upgrade/ / https://www.jerseyfsc.org/news-and-events/enhancements-to-the-jersey-private-fund-regime/

[1] https://www.alfi.lu/en-gb/pages/industry-statistics/luxembourg

[2] https://www.guernseyfinance.com/industry-resources/member/beauvoir-group/guernsey-s-private-investment-fund-regime-gets-a-major-upgrade/ / https://www.jerseyfsc.org/news-and-events/enhancements-to-the-jersey-private-fund-regime/

When cost differentials are considered — with Luxembourg and the Channel Islands often carrying a modest premium over local structures — it can be tempting to prioritise efficiency. But for a €75 million fund, the annual difference may represent less than 7 basis points. For a manager securing even one extra institutional LP because of jurisdictional familiarity, the return on that investment becomes obvious.

Strategic flexibility is the real differentiator

Fund structuring is not just about meeting regulatory requirements; it’s about enabling long-term strategic optionality. Luxembourg and the Channel Islands offer frameworks that accommodate a wide range of structuring tools including SPVs, feeder funds, co-investment sleeves, and carried interest vehicles. This flexibility allows managers to tailor investor participation and capital deployment without reworking the core fund.

From a scalability perspective, these jurisdictions have the infrastructure to support funds well beyond €250 million — without the growing pains associated with younger fund domiciles. Their ecosystems of AIFMs, administrators, legal advisors, and custodians, are well established, globally connected, and trusted by institutional investors.

The hidden premium: exit efficiency

The benefits of an established jurisdiction extend beyond fundraising and into the exit phase. Whether through secondary sales, restructurings, or M&A, the familiarity of a Luxembourg or Channel Islands-domiciled vehicle reduces execution risk, speeds up legal reviews, and often improves pricing. These advantages can be pivotal for VC managers navigating GP-led restructurings or preparing portfolios for liquidity events.

The verdict: cost vs. credibility is a false choice

Too often, emerging managers view the fund domicile decision as a cost-driven exercise. But in the competitive world of institutional capital raising, structure is strategy. The perceived premium of an established jurisdiction isn’t just about regulation — it’s a down payment on credibility, speed, and long-term growth.

In today’s market, where LPs demand more transparency, greater professionalism, and seamless cross-border execution, fund managers must align their platform design with their strategic ambitions. For those eyeing international growth, jurisdictions like Luxembourg and the Channel Islands remain the gold standard — not for tradition’s sake, but because they deliver where it matters most.

About Belasko

Belasko is a leading fund and fiduciary services firm supporting private capital managers across Luxembourg, the Channel Islands, and beyond. We have extensive experience structuring all types of private capital funds — including venture capital, private equity, private credit, and real estate. By combining leading regulatory infrastructure with agile technology and deep jurisdictional expertise, we help clients scale confidently — wherever their ambition leads.

If you’d like to discuss further how we can support you, get in touch with Greg McKenzie ([email protected]), Country Head in Luxembourg, or Alice Heald ([email protected]), Group Head of Marketing, based in Jersey.

[1] https://www.jerseyfsc.org/news-and-events/enhancements-to-the-jersey-private-fund-regime/

[2] https://www.alfi.lu/en-gb/pages/industry-statistics/luxembourg

[3] https://www.guernseyfinance.com/industry-resources/member/beauvoir-group/guernsey-s-private-investment-fund-regime-gets-a-major-upgrade/ / https://www.jerseyfsc.org/news-and-events/enhancements-to-the-jersey-private-fund-regime/