Private debt funds were already established in Luxembourg before AIFMD II. The reform does not create the strategy, but it gives loan origination a common operating framework across the European Union. Credit approval, concentration, leverage, liquidity and loan disposals now follow dedicated rules rather than relying only on the fund documents and general risk duties.
Luxembourg transposed the reform through the Law of 3 March 2026. The main requirements apply from 16 April 2026. A new Luxembourg fund with a lending strategy should therefore address them before the first investment is approved.
The scope of the loan rules
The framework separates loan origination from the simple purchase of a loan. The AIFMD II definitions cover a loan granted directly by an AIF. They also cover an indirect arrangement in which a third party or special-purpose vehicle originates for the AIF and the AIFM or AIF helps structure the loan or agrees its characteristics before exposure is taken.
| Transaction | Basic treatment |
|---|---|
| The AIF grants a new loan as original lender | Loan origination |
| A third party grants the loan after the AIFM helps set its terms | Indirect loan origination |
| The AIF buys an existing loan without prior involvement | Not loan origination by that purchase alone |
The legal wrapper does not decide the result. An SCSp or a RAIF can fall within the rules when its activity meets the definition.
Credit governance
An AIFM managing a fund that originates loans must maintain effective policies and processes for granting credit. Those controls must also cover credit-risk assessment, administration and monitoring.
The policy should match the actual investment process. It normally identifies who may approve a loan, how the borrower is assessed, how conflicts are handled and how collateral, covenants, amendments and recovery are monitored. The same information must reach valuation, risk management and investor reporting.
An adviser may source and analyse a transaction, but delegation does not remove the AIFM’s responsibility for the portfolio and its oversight.
Concentration and leverage limits
The dedicated borrower limit is narrower than a general portfolio concentration rule. Loans originated to one borrower may not exceed 20% of fund capital when that borrower is a financial undertaking, another AIF or a UCITS.
Loan-originating AIFs also have specific leverage limits.
| Fund structure | Maximum leverage |
|---|---|
| Open-ended loan-originating AIF | 175% |
| Closed-ended loan-originating AIF | 300% |
Leverage is measured as commitment-method exposure divided by net asset value. Borrowing that is fully covered by investors’ contractual capital commitments is excluded from this calculation. A separate exception applies where lending consists only of shareholder loans and their aggregate notional value does not exceed 150% of fund capital.
These limits affect the fund model, subscription facilities and asset-level financing. Monitoring only the vehicle that signs the loan may miss exposure elsewhere in the structure.
Liquidity and fund structure
A loan-originating AIF is closed-ended by default. An open-ended fund is possible only when the AIFM can demonstrate that the liquidity-risk management system fits the investment strategy and redemption policy.
This test compares the liquidity of the assets with the liquidity offered to investors. Loan maturities, expected repayments, secondary-market depth, redemption frequency and notice periods must work together. A statement in the prospectus cannot replace a workable cash-flow model.
Open-ended AIFs also fall within the harmonised liquidity-management framework. The CSSF communication of 18 March 2026 explains the Luxembourg selection, policy and notification process that took effect on 16 April 2026.
Loan transfers and retention
The fund cannot be managed under a strategy that originates loans solely to transfer them to third parties. The rule prevents a private debt fund from operating only as a temporary warehouse for distribution.
When an originated loan is sold, the AIF generally retains 5% of its notional value. For a loan with a maturity of up to 8 years, and for a consumer loan, retention normally lasts until maturity. For a longer non-consumer loan, it normally lasts for at least 8 years. The directive contains limited exceptions, including specified disposals required by the fund’s interests or regulatory constraints.
A disposal file should therefore record the original underwriting, the reason for sale, the retained exposure and the provision relied upon when full retention does not continue.
Restricted borrowers and conflicts
The framework restricts loans to the AIFM, its staff, the depositary, relevant delegates and certain entities in the AIFM’s group. The detailed perimeter matters because a borrower that appears unrelated to the fund may still be connected through the management or delegation chain.
Loan administration fees and expenses must also be disclosed, and the net proceeds of the loan belong to the fund. The economic result shown in the accounts must remain consistent with the lending terms and the disclosures made to investors.
The transition for existing funds
The transition depends on when the fund and the loan existed. AIFs constituted before 15 April 2024 receive temporary treatment for specified concentration, leverage and structural requirements until 16 April 2029. Existing levels cannot simply be increased beyond the new limits during that period.
Some older funds that do not raise additional capital after 15 April 2024 receive broader deemed compliance for the specified provisions. The directive’s transition article also distinguishes loans originated before that date from new lending.
The transition is therefore not a general exemption for an existing platform. New capital, new loans and changes to the strategy must each be tested against the relevant rule.
Conclusion
AIFMD II places loan origination inside a dedicated credit and liquidity framework. The result depends on the activity, not the fund wrapper. Credit policies, borrower concentration, leverage, liquidity, retention and conflicts should be aligned before lending begins, while older funds require a separate transition analysis.
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Frequently Asked Questions
When did the AIFMD II loan rules start applying in Luxembourg?
Luxembourg transposed AIFMD II in March 2026. The new framework applies from 16 April 2026, subject to transition rules for certain funds and loans that already existed.
Must a loan-originating AIF be closed-ended?
A closed-ended structure is the default. An open-ended structure remains possible when the AIFM can demonstrate that its liquidity system is compatible with the fund's strategy and redemption policy.
What leverage limits apply to a loan-originating AIF?
The limit is 175% for an open-ended loan-originating AIF and 300% for a closed-ended one. The ratio uses exposure calculated under the commitment method against net asset value.
Does the 20% borrower limit apply to every borrower?
No. The dedicated 20% limit applies when the single borrower is a financial undertaking, an AIF or a UCITS. Other concentration limits may still arise from the fund rules, risk policy or another product regime.
