The Luxembourg AIFM regime is the regulatory backbone of the country’s alternative investment fund industry. The law of 12 July 2013 transposed the AIFMD into Luxembourg law and replaced a fragmented set of pre-AIFMD rules with a single framework articulated around the figure of the alternative investment fund manager.¹² Since then, the AIFM regime has set the perimeter for the management, marketing, valuation, depositary appointment, delegation, conflict-of-interest handling and supervisory reporting of any Luxembourg AIF, from a single-strategy SCSp to a multi-billion euro fund-of-funds platform.

For sponsors structuring a Luxembourg vehicle, the AIFM regime is rarely a side issue. The choice between a sub-threshold registered AIFM and a fully authorised AIFM determines product eligibility, marketing reach, capital and substance. The choice between an in-house AIFM and a third-party AIFM platform shapes governance, time-to-market and operating costs. The AIFMD II transposition law in force on 16 April 2026 has now layered stricter delegation, liquidity management and loan-origination rules on top of the regime, and reset some of the trade-offs that had stabilised over the previous decade.³⁴

Setup, governance and ongoing administration around the AIFM perimeter usually run alongside Luxembourg SPV services for private equity, company formation, Lux GAAP accounting and tax compliance. The legal form of a Luxembourg AIF — typically a SCSp, sometimes wrapped in a RAIF, a SIF or a SICAR — must remain coherent with the AIFM appointment, with the LPA or articles, and with the depositary, central administration and valuation framework.

1. The AIF perimeter and the role of the AIFM

The AIFM Law applies once a Luxembourg vehicle qualifies as an alternative investment fund. The qualification is the same functional test set by the AIFMD. A vehicle is an AIF if it raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors, and is not a UCITS.¹² The test does not depend on the legal form, the regulatory wrapper or the marketing channel. It is read against the actual operating model of the vehicle.

When a vehicle qualifies as an AIF, an AIFM must be appointed. The AIFM is the legal person responsible for portfolio management and risk management. Two configurations are possible. An external AIFM is a separate legal person appointed by the AIF or on its behalf. An internal AIFM is the AIF itself, when its legal form permits internal management and its governing body chooses not to appoint an external manager.⁵ In Luxembourg fund practice, the external AIFM is the dominant configuration, and the internal AIFM remains a niche route reserved to corporate forms that fit it structurally. A vehicle without legal personality, such as the SCSp, cannot be authorised as an internally managed AIF and must always appoint an external AIFM. The general partner of the SCSp can act as that external AIFM in some configurations, but most sponsors keep the GP as a focused governance entity and appoint a separate AIFM.

The AIFM remains responsible for portfolio management and risk management even when functions are delegated to specialised entities. Delegation can extend to portfolio management, risk management or both, but the AIFM cannot delegate so much that it becomes a letter-box entity in the sense of the AIFMD and its delegated regulation. The AIFM Law and the CSSF FAQ on the Law of 2013 set the operating standards on delegation, oversight and substance.⁵ AIFMD II tightened the delegation regime further, with a clearer reporting obligation on delegated functions.

2. The Article 3(2) thresholds

The architectural divide of the regime sits in Article 3 of the AIFM Law.¹ An AIFM whose total assets under management remain below the relevant threshold falls under a lighter registration regime. An AIFM above the threshold falls under the full authorisation regime of Chapter 2.

The thresholds are taken directly from the AIFMD.² An AIFM can register as below-threshold if its total AUM, including assets acquired through the use of leverage, does not exceed EUR 100 million. The threshold rises to EUR 500 million if the portfolio of AIFs managed consists exclusively of unleveraged AIFs that have no redemption rights exercisable during a period of five years following the date of the initial investment in each AIF. The first ceiling is the everyday case for diversified portfolios, leveraged real estate or infrastructure strategies, and most private debt funds. The second ceiling fits naturally with closed-ended private equity and venture capital strategies.

The thresholds apply to the AIFM, not to a single fund. An AIFM that manages several AIFs aggregates their AUM under the methodology set by the AIFMD and the delegated regulation. Cross-holdings, leverage measurement and master-feeder structures must be analysed carefully when sizing the AUM, and the analysis is one of the early diligence points before deciding which regime to apply for.

A sub-threshold AIFM may also opt in voluntarily under Article 3(4) of the AIFM Law and become an authorised AIFM despite remaining below the AUM ceilings.¹⁵ In CSSF terminology, this is the opt-in authorisation route. It is regularly used by sponsors that expect rapid AUM growth, want the marketing passport upfront, or need access to product wrappers that require a fully authorised AIFM.

3. What a sub-threshold registered AIFM can and cannot do

The lighter regime is genuinely lighter, but the trade-offs are sharp and shape the structuring decision more than capital ever does.

A registered AIFM is registered with the CSSF and must report periodically on its AUM and on the principal instruments and exposures of its AIFs. It is not subject to the full set of AIFMD operating rules. It is not bound, as a matter of EU law, by the full delegation, valuation, depositary, conflict-of-interest, leverage and disclosure framework of the directive, although the Luxembourg framework remains tighter than the bare minimum for sub-threshold managers and individual product laws may impose their own rules.

The registered AIFM does not, however, benefit from the AIFMD marketing passport. Cross-border marketing of its AIFs to professional investors in the EU must rely on national private placement regimes country by country, which is a meaningful operational and legal cost for any sponsor with a multi-jurisdictional investor base. A registered AIFM cannot manage a Luxembourg RAIF, since the RAIF Law of 23 July 2016 expressly requires an external authorised AIFM.⁶ The same constraint applies to product wrappers whose product law is built around full AIFMD authorisation, which has historically pushed most professional Luxembourg fund sponsors toward the authorised regime.

In practice, the registered AIFM regime is therefore most relevant for compact closed-ended PE or VC structures with a single national investor base, for family office vehicles, or as a transitional setup before a planned move to full authorisation. A sponsor that expects the fund to scale, that needs the EU passport, or that wants the RAIF wrapper for time-to-market reasons starts directly under the authorised regime.

4. The authorised AIFM under Chapter 2

An authorised AIFM is licensed and supervised by the CSSF under Chapter 2 of the AIFM Law.¹ The authorisation file covers the legal form and shareholder structure, the senior management and board, the programme of activity, the operating organisation, the governance and substance plan, the conflict-of-interest framework, the risk management policy, the valuation policy, the delegation arrangements and the depositary appointment.

The capital framework is set by the law and by the AIFMD-CDR.¹²⁵ An external AIFM must hold an initial capital of at least EUR 125,000. An internal AIFM must hold at least EUR 300,000. Above EUR 250 million of assets under management, the AIFM must hold additional own funds equal to 0.02% of the AUM exceeding EUR 250 million. Professional liability risks must be covered either by additional own funds equal to at least 0.01% of AUM or by a professional indemnity insurance policy meeting the AIFMD standard.

Item	External AIFM	Internal AIFM
Initial capital	EUR 125,000	EUR 300,000
Additional own funds above EUR 250m AUM	0.02% of excess AUM	0.02% of excess AUM
Professional liability cover	Additional own funds (0.01% AUM) or insurance	Additional own funds or insurance

The substance and governance framework is the second pillar of the authorisation. The AIFM must have a Luxembourg head office, sufficient senior management, staff and operational infrastructure. Two senior managers — the dirigeants agréés — must be approved by the CSSF and effectively conduct the business of the AIFM from Luxembourg. Investment, risk and valuation committees must operate effectively. Delegation arrangements must remain compatible with the prohibition on letter-box entities. Internal audit, compliance and risk management functions must be designed in proportion to the AIFM’s activity and the complexity of its AIFs.

The operating model then follows the AIFMD itself. Annual reports must be prepared for each AIF and made available to investors within six months of period end. Annex IV reporting to the CSSF feeds into ESMA’s database. Transparency, conflict-of-interest, remuneration and disclosure requirements apply on an ongoing basis. Marketing notifications under the EU passport flow through the CSSF as the home regulator for Luxembourg-based authorised AIFMs.

5. Permitted activities and ancillary services

An authorised AIFM may, in addition to collective portfolio management of AIFs, provide a defined set of ancillary services. The traditional list under the AIFMD covered discretionary portfolio management for individual clients, investment advice, safekeeping and administration of fund units, and reception and transmission of orders.² Luxembourg authorised AIFMs commonly use these ancillary permissions to consolidate portfolio management for sponsor entities or co-investment vehicles inside the AIFM regulatory perimeter.

AIFMD II has extended the catalogue.³⁴ The list of permitted ancillary activities now opens to additional services that are useful in modern fund operations, on conditions to be confirmed in the authorisation file. The CSSF has clarified the application of these extensions through Circular 25/901 and the updated FAQ on the Law of 2013, which remain the authoritative operational reference.⁵

The boundary remains the AIFM’s authorisation perimeter. An activity that goes beyond what the AIFM is licensed to do cannot be added to the operating model without a formal extension of authorisation. The same logic applies to AIFMs that are also UCITS Chapter 15 ManCos, where the dual licence extends the catalogue further but must be operated within the rules of each regime.

6. The third-party AIFM platform

For a sponsor that does not want to set up its own ManCo, the third-party authorised AIFM platform is the default route. A third-party AIFM is a Luxembourg authorised AIFM that contracts with one or several sponsors to act as the AIFM of their AIFs. The portfolio management function is typically delegated back to the sponsor’s investment advisor, while the regulated functions — risk management, valuation, depositary appointment, regulatory reporting and AIFMD-level governance — sit at the level of the platform.

This route compresses time-to-market and removes the cost of running a regulated entity. It is the standard configuration for first funds, for sponsors that want to focus on portfolio management, and for sponsors whose deployment scale does not yet justify a dedicated AIFM. The trade-offs are real. The platform is the regulated counterparty in front of the CSSF and investors, and its governance, risk and conflict-of-interest framework apply across all AIFs it manages. Delegation back to the sponsor’s investment advisor must respect the letter-box prohibition and the AIFMD delegation rules, which AIFMD II has tightened further.

A sponsor that anticipates scaling to several products and wants long-term control over its regulated layer often plans a transition path. The first AIF is launched under a third-party platform. A dedicated authorised AIFM is set up once AUM, deal flow and team size justify the investment. Several Luxembourg sponsors run that two-step trajectory, and the third-party route is then used as a launchpad rather than a permanent operating model.

7. AIFMD II in force on 16 April 2026

The AIFMD II transposition law published in Mémorial A on 9 March 2026 entered into force on 16 April 2026, with certain enhanced reporting obligations deferred to 16 April 2027.⁴ The reform amends the AIFM Law of 12 July 2013 and the UCITS Law of 17 December 2010 to align Luxembourg with Directive (EU) 2024/927.³

The main changes affect five areas. Delegation oversight has been tightened, with stricter expectations on the AIFM’s substantive control over delegated functions and on the documentation and reporting of delegation arrangements. Liquidity management for open-ended AIFs has been reshaped, with a mandatory selection of at least two liquidity management tools from a harmonised EU list. Loan-originating AIFs are now framed by a dedicated regime, with risk-retention requirements on originated loans, diversification limits and leverage caps for open-ended structures, and specific rules on lending to consumers. The catalogue of ancillary activities an AIFM may offer has been extended. Supervisory reporting has been reinforced, with a phased implementation that defers the most demanding obligations to 2027.

For existing Luxembourg authorised AIFMs, the transition has been progressive. Internal organisation, delegation contracts, fund offering documents and disclosures have had to be reviewed against the new requirements. Loan-originating funds have required the most substantial changes. The CSSF has structured its supervisory expectations through Circular 25/901 and the updated FAQ on the Law of 2013, which remain the practical reference for the implementation.⁵

For new AIFM authorisation files, the AIFMD II framework is now the baseline. Authorisation programmes drafted before April 2026 generally have to be reworked to reflect the updated delegation, liquidity, loan-origination and ancillary-activities rules. The structuring conversation around an AIFM project that was true twelve months ago is not automatically true today.

8. Choosing the right AIFM route

The structuring choice between a sub-threshold registered AIFM, a dedicated authorised AIFM and a third-party authorised AIFM platform is shaped by four practical drivers. The investor base — especially its geographic and institutional profile — determines whether the EU marketing passport is needed. The product wrapper — RAIF, SIF, SICAR, Part II UCI or unregulated SCSp — determines whether full authorisation is required at all. The deployment scale and team size determine whether the cost of a dedicated AIFM can be amortised. The strategic horizon — single fund, sequential funds, platform — determines whether a transition path is worth planning from day one.

A first PE or VC fund with international LPs and a RAIF wrapper typically launches under a third-party authorised AIFM platform, with a dedicated AIFM planned for a later vintage. A small domestic fund with a single national investor base may stay under the registered regime if no RAIF wrapper is needed. A multi-strategy platform with multiple AIFs and a long-term presence in Luxembourg usually justifies a dedicated authorised AIFM from the outset, with the operating model designed to scale. The choice of an authorised AIFM also matters for the reverse hybrid analysis under Article 168quater LIR, since the investor-protection limb of the CIV carve-out is satisfied by an AIFM authorised under the AIFMD, which a registered sub-threshold AIFM is not.

The reasoning is rarely about regulation alone. The AIFM choice sits at the centre of the fund’s governance, substance, tax positioning, banking relationships and investor due-diligence path. A coherent route, planned from the structuring stage and adjusted along the AIFMD II implementation timeline, is what allows a Luxembourg manager to focus on portfolio management without revisiting the regulated layer at every fundraising.

Footnotes

1. Law of 12 July 2013 on alternative investment fund managers, as amended, transposing the AIFMD into Luxembourg law. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶

2. Directive 2011/61/EU on Alternative Investment Fund Managers, the EU base of the Luxembourg AIFM regime. ↩ ↩² ↩³ ↩⁴ ↩⁵

3. Directive (EU) 2024/927, known as AIFMD II, amending the AIFMD and the UCITS Directive on delegation, liquidity risk management, supervisory reporting, depositary and custody services, and loan origination by AIFs. ↩ ↩² ↩³

4. According to the Luxembourg legislator, the AIFMD II transposition law was published in Mémorial A on 9 March 2026 and entered into force on 16 April 2026, with certain enhanced reporting obligations deferred to 16 April 2027. ↩ ↩² ↩³

5. According to the CSSF, the FAQ on the Law of 12 July 2013 on alternative investment fund managers consolidates the supervisory expectations on the AIF perimeter, the registered and authorised regimes, delegation, capital, ancillary activities and reporting. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶

6. Law of 23 July 2016 on reserved alternative investment funds, Article 4, requires an external authorised AIFM and excludes sub-threshold AIFMs from managing a RAIF. ↩