The Luxembourg AIFM regime: registered, authorised and third-party routes

A Luxembourg alternative investment fund needs an alternative investment fund manager, or AIFM, whose status fits its activity, size and fund rules. Registration may be available below the statutory thresholds. Full authorisation is required above them, unless a specific exemption applies. An ordinary reserved alternative investment fund, or RAIF, requires an authorised AIFM regardless of size. The sponsor, which initiates the fund, can use its own authorised manager or appoint an existing third-party AIFM.

The starting point is whether the vehicle qualifies as a fund. A vehicle is an alternative investment fund, or AIF, if it raises capital from a number of investors and invests that capital under a defined policy for their benefit, unless an exclusion applies. The test looks at what the vehicle does, which is why an unregulated SCSp, or special limited partnership, can be an AIF just as a regulated fund can. The main rules are in the Law of 12 July 2013 on alternative investment fund managers.

The AIFM’s role

An AIFM is responsible for portfolio management, meaning the management of the fund’s investments, and risk management. An authorised AIFM must also meet the full regime’s rules on valuation, conflicts of interest, delegation, reporting and, where applicable, the depositary, which monitors cash and safeguards assets. The manager can be internal or external. An internal AIFM is the fund itself when its legal form permits self-management, but an SCSp has no legal personality and cannot follow that route, so it needs an external manager alongside its general partner.

Delegation does not shift that responsibility. An authorised AIFM may appoint investment advisers or delegate defined functions to another provider. It must still supervise the work and cannot become a letter-box entity, meaning a manager in name only. The FAQ on the AIFM Law from the Commission de surveillance du secteur financier (CSSF), Luxembourg’s financial supervisor, explains how it reads that boundary, which matters most for a sponsor who expects to keep control of investment decisions in practice.

Registration below the thresholds

Article 3 of the AIFM Law provides a lighter registration regime for smaller managers. The thresholds apply to the total assets managed by the AIFM, rather than to each fund separately. A sponsor with several vehicles must therefore consider their combined assets. The EUR 100 million threshold includes assets acquired through leverage, which increases investment exposure through borrowing or other arrangements. The higher threshold requires no redemption rights, meaning no right to return units or shares to the fund for payment, for 5 years after the initial investment in each AIF.

A registered manager must register with the CSSF. It must provide the required information on its funds, assets and investment exposures. It does not receive the European marketing passport, which allows marketing to professional investors across the EU under a notification procedure. Nor does it enter the full operating regime under the Alternative Investment Fund Managers Directive (AIFMD). The resulting distribution limits matter even where registration is sufficient for the size of the portfolio.

The higher threshold has strict conditions. Every AIF in the calculation must be unleveraged and must meet the five-year redemption condition, so one leveraged vehicle in the portfolio is enough to bring the manager back to the EUR 100 million test. A manager close to either threshold must monitor the combined assets, because growth across several vehicles can change its status without any new fund being launched.

Full authorisation

An AIFM above the relevant threshold needs full authorisation, and a smaller manager may opt into the full regime, typically in order to use the passport. The CSSF authorisation page identifies the legal conditions and application route.

Capital is the visible condition. An external authorised AIFM must have initial capital of at least EUR 125,000, and the minimum for an internally managed AIF is EUR 300,000. Additional own funds, the manager’s own financial resources, are required at 0.02% of the amount by which assets under management exceed EUR 250 million. The combined initial-capital and additional-own-funds requirement is capped at EUR 10 million, with a qualifying guarantee option for up to half the additional amount. A separate minimum based on fixed operating expenses still applies. Professional liability risk must be covered through further own funds or suitable insurance.

Authorisation also requires an organisation able to carry out the proposed activity. The CSSF reviews the people directing the business, governance, risk management, valuation, delegation, conflicts, compliance and reporting. At least two suitably experienced persons must conduct the business full-time and be domiciled in the EU. The legal minimum capital is only one part of this assessment.

The third-party AIFM route

A sponsor does not need to build its own authorised management company. It may appoint an existing authorised external AIFM, which is commonly described as the third-party AIFM route.

The fund keeps its own governing bodies or appointed managers and service providers. The appointed AIFM takes responsibility for the regulated management functions. The division of responsibilities must be clear in the limited partnership agreement, the management agreement and the delegation arrangements, because investment proposals from the sponsor do not replace the AIFM’s decision-making and oversight duties.

A third-party appointment avoids a separate authorisation project, but the fund then depends on an external provider. Before launch, the sponsor must assess whether the provider can handle the strategy, which functions will be delegated, what information must be reported, which fees the fund will bear and how the appointment can end.

Product choice and marketing

The selected fund regime can remove the choice altogether. A RAIF must appoint an external authorised AIFM under the RAIF Law, so a registered sub-threshold manager cannot manage it, whatever its size.

A plain AIF structured as an SCSp may use a registered manager while the conditions remain satisfied. Marketing then follows the national rules of each target jurisdiction, because the AIFMD passport is unavailable without full authorisation. An authorised AIFM, by contrast, can use the European passport for eligible professional-investor marketing after completing the required notification process. The intended markets and investors therefore shape the choice alongside assets under management, and the comparison between a RAIF and a plain SCSp turns largely on that point.

AIFMD II from April 2026

The Law of 3 March 2026 transposed Directive (EU) 2024/927, known as AIFMD II. This reform changed parts of the regime for delegation, loan origination and the services that an AIFM may provide. The expanded supervisory-reporting provisions have a separate application date of 16 April 2027.

The most immediate operational change concerns open-ended AIFs, which allow investors to request redemption before the fund winds up. The CSSF communication of 18 March 2026 states that authorised AIFMs managing these funds must select at least two liquidity-management tools from points 2 to 8 of the statutory list, with a one-tool exception for authorised money-market funds, and the requirements took effect on 16 April 2026. Choosing only swing pricing and dual pricing is insufficient. The selected tools and their activation procedures must be reflected in the fund documents and communicated to the CSSF.

These tools help the manager handle redemption requests when cash or assets that can readily be sold are limited. The impact depends on the strategy. A closed-ended private equity fund does not face the same liquidity issue as an open-ended real estate fund, while a loan-originating AIF must review the dedicated AIFMD II rules. Existing documents and operating procedures therefore need a review that reflects the fund’s strategy.