Agefi Luxembourg - février 2026

Février 2026 23 AGEFI Luxembourg Fonds d’investissement O n 19 December 2025, the Commission de Surveillance du Secteur Financier (CSSF) published CSSF Circular 25/901 (the Circular). This represents a transformative moment in the CSSF supervision of the Luxembourg investment fund sector creating themost sig- nificant consolidation of alterna- tive investment funds (i.e. Part II UCIs, SIFs and SICARs) guidance in several decades. By repealing decades-old circulars and outdat- ed administrative practices, the CSSF has clearly demonstrated its intention tomodernise, stream- line, and clarify regulatory expec- tations and on the other hand a more liberal approach relating to more sophisticated investors. The Circular is more significant than a mere consolidation, it signals a decisive move toward a risk-calibrated frame- work that reflects on one hand the growing democratisation of private assets and the need for more refined investor protection. A new investor taxonomy A fundamental innovation in the Circular is the introduction of a formal category of an “unsophisticated retail investor”. This category is defined resid- ually: it encompasses any investor who is neither a “professional investor” as defined by AIFMD or MiFID II nor a “well-informed investor” as defined by the SIF or SICAR laws. This distinction is critical because it acts as the primary driver for the calibration of prudential limits, such as diversification thresholds and borrowing caps. The rationale behind this move is the observed trend of “democratisation” in the alternative investment fund space. As fund managers increasingly seek capital fromhigh-net-worth individuals and even broader retail segments throughplatforms and feeder structures, the CSSF has identified a need to grad- uate the investor protection levels. For investment fundsmarketed to these unsophisticated retail investors, the Circular prescribes not only stricter investment limits but also enhanceddis- closure requirements, includingmanda- tory riskwarnings in the sales documen- tation to highlight the specific risks of private market strategies. Conversely, for investment funds reserved for professional or well- informed investors, the Circular for- malises a more liberal approach. This allowsmanagers to constructmore con- centrated portfolios and employ higher levels of leverage, provided that such risks are clearly articulated to an audi- ence capable of performing its own sophisticated due diligence. This bifur- cation ensures that Luxembourg remains an attractive domicile for insti- tutional-grade private equity, venture capital and other “illiquid” asset classes while providing a secure environment for retail-facing alternative products. Rethinking diversification limits The Circular introduces modernised diversification thresholds that vary according to both the investor profile and the nature of the underlying assets. In doing so, it departs from the historic “30% rule” that governed SIFs under CSSF Circular 07/309 and replaces it with amore granular, percentage-based regime. This evolution is designed to givemanagers greater flexibility inport- folio construction, particularly for strate- gies built around concentrated expo- sures or club-deal structures Against this backdrop, the increaseof the general single-asset cap for SIFs restrict- ed to well-informed or professional investors to50%—up fromthe tradition- al 30% limit—represents a notable shift for private equity, real estate strategies and other ‘illiquid’ assets strategies, where concentrated, high-conviction positions are often needed. In parallel, the introduction of 50%and 70%thresh- olds for infrastructure assets formalises what had previously been a flexible but often opaque administrative practice, therebyprovidingawelcomed legal cer- tainty for managers. Anchored inELTIF 2.0’s retail-protection logic under which retail-marketed ELTIFs are typically subject to ~20%sin- gle-asset limits the Circular applies a 25%single-asset cap (50%for infrastruc- ture) to retail-facing investment funds. Buildingon this clarification, theCircular also codifies the “look-through” princi- ple in relation to intermediary vehicles (including master/feeder structure) irre- spective of the legal form or regulatory status of an intermediate structure, the relevant investment limits apply at the level of the underlying assets, provided the fund retains sufficient oversight and control. This alignment with wider European practice ensures that structur- ing layers—whether driven by tax effi- ciency, governance, or jurisdictional con- siderations—cannot be used to sidestep risk-spreading requirements. Further, theCircular addresses the prac- tical realities of private-market investing by defining the lifecycle periods during which diversification limitsmay be sus- pended. The formalisation of “ramp- up” and “wind-down” periods gives managers a clear regulatory framework within which to deploy capital and realise investments without the risk of technical non-compliance at the begin- ning or end of a fund’s life. Importantly, these periods are not auto- matic. Theymust be expresslyprovided for in the sales documents andapproved by the CSSF. For illiquid strategies— such as private equity, private credit and venture capital—the four-year ramp-up periodaligns flexiblywithmarket needs for capital deployment in closed-ended vehicles, while the possibility of a one- year extension in exceptional circum- stances (for instance, market disruption or sourcing delays) provides essential additional flexibility. During the wind-down phase, the focus shifts to ensuring orderly exits; in this context, the Circular allows limits to be temporarily suspended to avoid forced sales that would prejudice investor interests. Codification of the definition of risk capital For the SICAR regime, the Circular refines the notion of risk capital – reflecting a long established regulatory practice - by anchoring it in three essential elements of an opportunistic investment: - First, an investment must support a genuine concept of development,mean- ing the deployed capital contributes to the target’s growthor value-creation tra- jectory—such as launch, expansion or structural transformation—rather than merely financing passive asset holding. - Second, the investment must involve specific risk, assessed at the level of the individual target and reflecting expo- sure beyond general market move- ments. This requires a concrete evalua- tion of the target’smaturity, operational challenges and development outlook. - Third, each investmentmust be guided by a predefined exit strategy, with the expected holding period and credible divestment routes clearly described in the sales documents, ensuring that value realisation is anticipated once the devel- opment phase is achieved. Newborrowing and leverage parameters The borrowing rules introduced by the Circular aim to strike a balance between enabling operational leverage and ensuring robust protection of retail capital. In particular, for Part II UCIs marketed to unsophisticated retail investors, the CSSF has set a clear upper limit: borrowing for investment purposes may not exceed 70% of the investment fund’s assets or subscrip- tion commitments. This threshold therefore serves as an essential safe- guard against both systemic and idiosyncratic risks that may arise from excessive leverage in products offered to unsophisticated retail investors. By contrast, investment funds reserved to professional or well-informed investors benefit from a more flexible framework. Rather than imposing a hard cap, the regulator allowsmanagers to determine their own borrowing lim- its, provided that these are transparently disclosed in the sales documents. RAIF analogy Although the Circular is addressed to CSSF-authorised funds, its influence naturally extends to RAIFs. SIF-like RAIFs are expected respect the statutory risk-spreading requirement, andmarket practice has long relied on SIF guidance to interpret it. The Circular’s updated limits and definitions are therefore expected to become the new reference point for the RAIF market. In this light, RAIFmanagersmay choose to align their documentation with the Circular’s modernised thresholds, including the 50% single-asset cap and increase to 70% for infrastructure strate- gy, to enhance investor comfort. The Circular’s clarifiednotions of risk capital and intermediary-vehicle structures also offer helpful guidance for RAIF boards when assessing structural and portfolio compliance. Future market outlook The Circular imposes enhanced trans- parency requirements on fund man- agers, particularly concerning the con- tent of sales documents, and the CSSF expects sales documents to provide a comprehensive view of the fund’s investment policy, asset eligibility, and riskmanagement processes. The intro- duction of the “Compilation of key concepts” is a vital auxiliary to these disclosure standards, clarifying the CSSF’s interpretation of technical terms like “investment policy,” “asset classes,” and “subscription and redemption models”. Byusing this compilation,managers can ensure that their prospectus/ offering document language is aligned with the regulator’s internal vocabulary, poten- tially reducing the time required for fund authorization. The Circular marks a strategic refresh of Luxembourg’s fund framework, strengthening competitiveness through more flexible investment and borrow- ing rules while maintaining the strong safeguards that define the Luxembourg brand. In practice, the Circular offers a modern and innovation friendly frame- work that reinforces Luxembourg’s role as a leading centre for both retail orient- ed as well as institutional/professional alternative strategies. As implementation progresses in 2026, the main challenge will be translating the newstandards intoday-to-dayoper- ations, particularly when aggregating exposures through intermediary vehi- cles or managing life-cycle derogations. TheCircular does not apply retroactive- ly, meaning funds authorised before 19 December 2025 may continue under their current rules. Managers therefore benefit forma transitionperiod to imple- ment the new requirements and deter- mine whether to migrate legacy struc- tures to the updated, more flexible regime or retain the existing approach. Manfred DIETRICH, Partner Astrid VAILLANT, SeniorAssociate Pawel BUNIOWSKI, SeniorAssociate Pinsent Masons Luxembourg LLP Strategic analysis of CSSFCircular 25/901 Etienne de Callataÿ - Economic Advisor chez Orcadia Asset Management Jeudi 5 mars de 11h45 à 14h15 Conférence Ecofin Club à l’Hôtel Parc Belair - Goeres Hotels Luxembourg Regarder au-delà de 2026. Réflexions sur des questions économiques et financières de moyen terme Paf membres : 75€ ttc pp (Apéro networking & lunch 3 services compris). Paf nonmembres : 85€ ttc pp en découverte et max. 1 visite avant adhésion. À verser sur le compte bancaire : BIC - GEBABEBB - IBANBE73 0015 4949 3760 – Réf. 05/03 Lieu : 111, Avenue du X Septembre - L-2551 Luxembourg - Parking dans l'hôtel en fonction des disponibilités Info club & devenir membre : www.ecofinclub.lu - didier.roelands@ecofinclub.lu