Luxembourg implements AIFMD II and UCITS VI
min readLuxembourg has transposed Directive (EU) 2024/927[1] (Directive 2024/927) by means of the Luxembourg law of 3 March 2026[2] (the 2026 Law)[3]. The 2026 Law, which was published on 9 March 2026, amends the Luxembourg law of 12 July 2013 on alternative investment fund managers (the AIFM Law) and the Luxembourg law of 17 December 2010 relating to undertakings for collective investment (the UCI Law).
The changes introduced primarily concern alternative investment fund managers (AIFMs) authorised under the AIFM Law, management companies authorised under Chapter 15 of the UCI Law (Chapter 15 ManCos) and self-managed investment companies. To some extent, the changes also affect Luxembourg alternative investment funds (AIFs) and Luxembourg undertakings for collective investment in transferable securities (UCITS). This article provides an overview of the main changes introduced to the AIFM Law and the UCI Law.
Key Amendments to the AIFM Law and UCI Law
Liquidity Management Tools (LMTs)
Directive 2024/927 introduces a harmonised set of tools designed to help AIFMs and management companies better manage a fund’s liquidity, particularly in the event of large subscriptions or significant redemption requests. Accordingly, the 2026 Law adds an annex containing nine so-called LMTs to both the AIFM Law and the UCI Law[4]. Authorised AIFMs managing open-ended AIFs and Chapter 15 ManCos must, after assessing the suitability of those tools in relation to the investment strategy pursued, select at least two LMTs from the LMTs No. 2 to 8 that may be activated to manage liquidity as necessary[5].
The constitutive documents of such AIFs or UCITS must identify these LMTs, with a view to their potential deployment in the interests of investors. For money market funds subject to Regulation (EU) 2017/1131[6], it is sufficient to select and identify one LMT.
LMT No. 1 (suspension of subscriptions, repurchases and redemptions) and LMT No. 9 (use of side pockets) are only available for exceptional cases, where the circumstances and the interests of investors so require. LMT No. 8 (redemption in kind) is permitted only in respect of professional investors.
Appropriate policies and procedures must be implemented to govern the activation and deactivation of such tools, as well as to define their administrative and operational modalities.
Prior to the activation or deactivation of any LMT, the Luxembourg regulator, the Commission de Surveillance du Secteur Financier (the CSSF) must be notified in respect of UCITS. The CSSF may also require the activation or deactivation of an LMT for UCITS where it identifies risks to investor protection or financial stability. For AIFs, the obligation to notify the CSSF of the activation or deactivation of an LMT depends on the specific LMT and the circumstances involved.
Distribution
The 2026 Law provides a significant clarification concerning the distribution of UCITS and AIFs. Where a distributor markets a UCITS or an AIF pursuant to Directive 2014/65/EU[7] or through insurance-based investment products in accordance with Directive (EU) 2016/97[8] for its own benefit, such activity shall not be considered a delegation of functions of the AIFM or Chapter 15 ManCo, irrespective of any distribution agreement between the distributor and the AIFM or Chapter 15 ManCo.
Substance and governance requirements
As part of the authorisation process, and in accordance with applicable substance requirements, AIFMs and Chapter 15 ManCos must employ either two natural persons, or appoint two executive members or members of the governing body, on a full-time basis and resident in the EU, to conduct their business.
Ancillary services
The scope of ancillary services has been expanded to include also benchmark administration (for AIFMs and Chapter 15 ManCos) and credit servicing (for AIFMs). AIFMs and Chapter 15 ManCos may offer ancillary services to third parties that they already provide to the funds they manage, provided that conflicts of interest are effectively identified and managed.
Reporting obligations
As from 16 April 2027, harmonised reporting to the CSSF will be required regarding the transactions for the portfolio of funds and regarding the delegation of functions and the oversight of such delegation. Accordingly, AIFMs and Chapter 15 ManCos will be required to inform the CSSF inter alia on the instruments they trade on behalf of each AIF or UCITS they manage, as well as the markets on which those instruments are traded.
In relation to the delegation of functions, AIFMs and Chapter 15 ManCos must communicate to the CSSF in particular:
- where the portfolio management function has been delegated, the amount and percentage of assets covered by the delegation arrangements;
- the number of full-time equivalent persons employed by the Chapter 15 ManCo or the AIFM to monitor the terms of the delegation;
- the number and dates of periodic due diligence reviews conducted to monitor the delegated task, the list of issues identified and, where applicable, the measures taken to address them, as well as the date by which these measures must be implemented;
- where sub-delegation arrangements exist, similar information on the sub-delegation.
Details in this respect shall be set out in regulatory technical standards. The European Securities and Markets Authority (ESMA) has been instructed to submit draft regulatory technical standards to the European Commission by 16 April 2027[9].
The amendments specific to the AIFM Law
Depositary passport?
For AIFs with an authorised AIFM, a depositary must to date be appointed in the same Member State as the AIF. Directive 2024/927 affords Member States the option to permit AIFMs to appoint a depositary in a different Member State, provided that certain criteria are met. One such criterion is that “the aggregate amount in the national depositary market of the home Member State of the AIF of assets entrusted for safe-keeping on behalf of EU AIFs authorised or registered under the applicable national law does not exceed a threshold of EUR 50 billion or the equivalent in another currency”. The Luxembourg depositary market exceeds this threshold and accordingly, Luxembourg AIFs with an authorised AIFM must still appoint a depositary established in Luxembourg. However, the AIFM Law permits Luxembourg AIFMs to manage AIFs established in other Member States, even where those Member States accept that the depositary of the AIF is established in a different country. Luxembourg depositaries may also offer depositary services for AIFs in other Member States, if the relevant criteria are met.
Loan originating AIFs
Luxembourg AIFs could already be originating loans before Directive 2024/927 came into effect[10]. Loan origination by AIFs with an authorised AIFM is now subject to a harmonised framework with applicable requirements in particular in relation to diversification, maximum leverage and retention percentage.
Luxembourg has opted to exercise the discretion afforded to Member States and prohibits AIFs from granting or managing loans to consumers in Luxembourg (as defined in the Luxembourg Consumer Code).
Nevertheless, the granting of loans to consumers may be permissible where consumers are located in a Member State that has not exercised this option.
Irrespective of the foregoing, an AIF with an authorised AIFM must not grant loans to the AIFM or the AIFM’s staff, to its depositary or any delegate thereof, to any delegate of the AIFM or to staff of any such entity, nor, in principle to an entity within the same group as the AIFM.
An AIFM managing loan originating AIFs must establish and maintain effective policies and procedures for the assessment of credit risk, as well as for the administration and ongoing management of its loan portfolios. These policies, procedures and processes must be updated and reviewed periodically, and no less frequently than once per year.
The amendments specific to the UCI Law
Contribution in kind to Part I SICAVs without report of statutory auditor
Where shares of an investment company under part I of the UCI Law are issued in exchange for contributions in kind, the board of the investment company is exempt from the requirement to appoint an independent auditor to prepare a report, on the condition that the principle of fair treatment of investors is respected.
For further information, please contact Tobias Niehl.
[1] Directive (EU) 2024/927 of the European Parliament and of the Council of 13 March 2024 amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, the provision of depositary and custody services and loan origination by alternative investment funds.
[2] Law of 3 March 2026 amending 1° the amended law of 17 December 2010 on undertakings for collective investment, 2° the amended law of 12 July 2013 on alternative investment fund managers, with a view to transposing Directive (EU) 2024/927 of the European Parliament and of the Council of 13 March 2024 amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, the provision of depositary and custody services, and lending by alternative investment funds.
[3] According to Article 3, paragraph 1 of Directive 2024/927, Member States must adopt and publish the legislative and administrative provisions to comply with Directive 2024/927 by 16 April 2026. Member States have to apply these measures from 16 April 2026, except for the measures transposing Article 1 (12) and Article 2 (7) of Directive 2024/927, which they must apply from 16 April 2027.
[4] As in Directive 2024/927, these annexes are identical.
[5] Opting only for LMTs 5 and 6 (Swing Pricing and Dual Pricing) is not sufficient.
[6] Regulation (EU) 2017/1131 of the European Parliament and of the Council of 14 June 2017 on money market funds.
[7] Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (recast).
[8] Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (recast).
[9] The draft regulatory technical standards must be submitted by ESMA to the European Commission by 16 April 2027, which is also the date of the entry into force of the reporting obligations.
[10] “Originating loans on behalf of an AIF” has been added as an activity to Annex I of Directive 2024/927 (and consequently to Annex I of the AIFM Law). According to recital (5) of Directive 2024/927, this is a clarification intended to “enhance legal certainty”.
