AIFMD II (Directive 2024/927) takes effect on 16 April 2026 and introduces new requirements for alternative investment fund managers (AIFMs) across the EU. This directive brings a series of pivotal changes impacting both non-EU and EU AIFMs. The primary objective of AIFMD I was to enhance transparency, protect investors, and mitigate systemic risks associated with alternative investment funds. The directive covers delegation and substance, liquidity management, loan origination and supervisory reporting.
In Luxembourg, Draft Bill 8628 (submitted to Parliament in October 2025) transposes AIFMD II into national law without gold-plating the directive. The implementation in Luxembourg extends the list of authorized services for management companies, including credit servicing and loan origination by alternative investment funds. Alongside this legislative process, the CSSF issued Circular 25/901 on 19 December 2025, consolidating and modernising the regulatory framework for Specialised Investment Funds (SIFs), investment companies in risk capital (SICARs) and Part II Undertakings for Collective Investment (Part II UCIs).
Together, these developments represent one of the most significant regulatory updates for Luxembourg-domiciled alternative investment funds in over a decade. For fund managers, conducting officers and operational teams, the changes affect day-to-day processes across multiple areas from how delegation is documented and monitored, to how liquidity tools are selected and activated, to what data is collected for regulatory reporting.
In brief: AIFMD II applies from 16 April 2026 and reshapes how Luxembourg-based fund managers handle delegation, liquidity management, loan origination and regulatory reporting. CSSF Circular 25/901 adds modernised rules for SIFs, SICARs and Part II UCIs. Enhanced Annex IV regulatory reporting applies from 16 April 2027. AIFMD II requires Member States to comply with the new rules by 16 April 2026, and authorities across the european union are coordinating to ensure harmonised supervision.
- AIFMD II applies from 16 April 2026; Luxembourg transposes the directive without adding extra requirements beyond the EU framework
- AIFMs managing open-ended AIFs must implement at least two liquidity management tools from a harmonised EU list
- The first EU-wide framework for loan-originating AIFs introduces leverage caps, concentration limits and a 5% risk retention requirement
- Enhanced Annex IV regulatory reporting applies from 16 April 2027, including detailed delegation and staffing data
- CSSF Circular 25/901 updates risk-spreading, disclosure and borrowing rules for SIFs, SICARs and Part II UCIs
The original Alternative Investment Fund Managers Directive (AIFMD) came into force in 2013 and established the regulatory framework for managing and marketing alternative investment funds in the EU. Its primary objective was to enhance transparency, protect investors, and mitigate systemic risks associated with alternative investment funds. Over the past decade, it has been a central driver of Luxembourg’s position as Europe’s leading fund domicile, with the country now hosting close to EUR 6 trillion in fund assets.
AIFMD II, formally adopted and published in the Official Journal in March 2024, represents a targeted evolution of this framework. It does not change the definitions of AIFs or AIFMs, nor does it fundamentally alter the delegation model. Instead, it introduces specific enhancements in areas where market practice and regulatory expectations have developed since 2013: delegation oversight, liquidity risk management for open-ended funds, loan origination and supervisory reporting. EU Member States have until 16 April 2026 to transpose the directive into national law.
Luxembourg submitted Draft Bill 8628 to Parliament on 3 October 2025. The bill amends both the UCI Law (Law of 17 December 2010) and the AIFM Law (Law of 12 July 2013). True to Luxembourg’s approach, the transposition mirrors the directive closely without introducing additional requirements; an approach that provides certainty for fund managers and maintains the jurisdiction’s reputation for a pragmatic regulatory environment.
The bill is expected to enter into force on 16 April 2026, with reporting obligations applying from 16 April 2027. Authorities require Member States to implement these changes into their local laws by 16 April 2026. It may still undergo amendments during the parliamentary process.
AIFMD II broadens the scope of delegation rules in a way that affects how Luxembourg fund managers organise and oversee their service provider arrangements. Delegation requirements now extend beyond portfolio and risk management to include fund administration, marketing, loan origination and other Annex I activities. This means AIFMs will need to review a wider universe of what qualifies as a delegated function under the directive. The updated delegation framework also introduces increased requirements for transparency and substance, especially when delegating to a third party, in order to ensure regulatory compliance and effective oversight.
In operational terms, fund managers will need to maintain a comprehensive delegation register that captures activity descriptions, oversight arrangements, service level agreements, reporting cadences and remediation tracking. From April 2027, enhanced Annex IV reporting will require AIFMs to disclose detailed data on delegation arrangements, including the number of full-time employees performing portfolio and risk management internally, FTEs monitoring delegates, due diligence outcomes and the regulatory status of each delegate. The management of conflicts of interest is particularly important when delegating to third parties or when a fund is initiated by a third party, requiring clear documentation and preventive measures.
At the AIFM level, at least two full-time natural persons domiciled in the EU must conduct the business of the manager. For Luxembourg, this formalises what has been standard administrative practice. The CSSF already requires at least two conducting officers, typically resident in or around Luxembourg. The substance requirements under AIFMD II are therefore not expected to create material new obligations for established Luxembourg AIFMs. However, adequate human resources and IT services are essential to monitor delegation arrangements and ensure ongoing compliance with regulatory obligations.
For each open-ended AIF they manage, AIFMs will be required to select at least two liquidity management tools (LMTs) from a harmonised EU list. The available options include redemption gates, extension of notice periods, swing pricing, anti-dilution levies and redemption fees. In addition, the ability to suspend subscriptions and redemptions must remain available for use in exceptional circumstances. These options (LMTs) must be chosen in order to align the redemption policy with the liquidity profile of the fund, ensuring that the redemption policy is consistent with the liquidity profile, especially for open-ended loan-originating AIFs.
Fund managers must implement detailed policies and procedures for activating and deactivating these tools, including the operational and administrative arrangements for their use. AIFMs must notify their competent authorities when activating or deactivating LMTs in a manner not in the ordinary course of business. ESMA is also tasked with developing guidelines on the selection and calibration of liquidity management tools for AIFMs. This applies not just to funds that are traditionally considered “open-ended” — the definition under AIFMD II captures any AIF where units are repurchased or redeemed at the request of investors prior to liquidation or wind-down. This means certain semi-liquid or hybrid structures may also fall within scope.
Luxembourg’s Draft Bill goes a step further than the directive by expressly permitting the use of additional liquidity management tools beyond those on the harmonised list, giving AIFMs greater operational flexibility. The harmonisation of liquidity tools aims to prevent abrupt suspensions of redemptions. The use of redemption in kind is restricted to professional investors and must correspond to a pro rata share of the assets held by the AIF. The RTS detailing these rules were adopted by the European Commission on 18 November 2025, though compliance with the RTS is not mandatory until 16 April 2027. Existing funds will have an additional 12 months beyond that date to comply.
AIFMD II establishes the first harmonised EU framework for alternative investment funds that originate loans. Loan origination by alternative investment funds is defined as the granting of a loan directly by an AIF or indirectly through a third party or special purpose vehicle on behalf of the AIF. This is particularly relevant for Luxembourg as the EU’s primary domicile for private credit funds. AIFMD II defines a loan-originating AIF as an AIF whose investment strategy is mainly to originate loans or whose originated loans represent at least 50% of its net asset value. The new framework for loan origination by alternative investment funds is designed to ensure regulatory consistency across eu aifms and enhance investor protection.
Key elements of the new framework include a 5% risk retention requirement (the AIFM must ensure the fund retains 5% of the notional value of each originated loan), a 20% borrower concentration limit and leverage caps calculated using the commitment method: 175% of NAV for open-ended loan-originating AIFs and 300% for closed-ended structures. In addition, AIFMs must retain 5% of the notional value of loans that they originate and subsequently transfer to third parties, unless certain exemptions apply. Loan-originating AIFs must in principle be closed-ended, unless the AIFM can demonstrate to the CSSF that an appropriate liquidity risk management system is in place.
Luxembourg has opted to prohibit AIFs from granting consumer loans to consumers within its territory. However, Luxembourg AIFs may still engage in consumer lending in other EU jurisdictions where local law permits. The bill’s commentary also clarifies that a Luxembourg AIFM may manage an AIF that has acquired a portfolio containing consumer loans on the secondary market.
From a Luxembourg perspective, the loan origination framework largely formalises existing practice. Loan origination by or on behalf of AIFs was already considered a permitted AIFM activity under the AIFM Law. The commentaries accompanying Draft Bill 8628 confirm that this is a confirmation rather than an amendment of regulatory practice, providing greater legal certainty for cross-border activities as well. Luxembourg AIFMs are expected to comply with AIFMD II requirements more easily due to existing practices aligned with the new rules. AIFMD II aims to offer alternative sources of financing to European SMEs by facilitating the activity of debt funds, while also strengthening investor protection and regulating liquidity management tools.
AIFMD II expands both investor-facing disclosures and regulatory reporting obligations. On the investor side, AIFMs must disclose all fees, charges and expenses borne in connection with the operation of the AIF. For loan-originating AIFs, periodic disclosure of the composition of the originated loan portfolio is also required. Fund managers must also describe the possibility and conditions under which liquidity management tools may be activated.
On the regulatory side, Annex IV reporting becomes significantly more granular. New data points cover delegation arrangements (including activities delegated, percentage of assets under delegation and contract dates), internal staffing (FTEs in portfolio management, risk management and delegation oversight) and due diligence outcomes. ESMA is expected to launch a consultation on the related RTS and ITS in H2 2026, with all AIFMs in scope required to report under the new standards from 16 April 2027.
Issued on 19 December 2025, CSSF Circular 25/901 consolidates and replaces several older circulars (including CSSF 02/80, 07/309 and 06/241) and introduces a modernised regulatory framework for SIFs, SICARs and Part II UCIs in Luxembourg.
The Circular differentiates requirements based on investor type. Funds marketed to unsophisticated retail investors face a 25% single-issuer concentration limit and a 70% borrowing cap (for investment purposes). Funds reserved for well-informed or professional investors operate under higher thresholds: up to 50% per issuer (or 70% for infrastructure investments). For these professional-only structures, funds may set their own maximum borrowing limit.
The Circular also formalises ramp-up and wind-down periods for portfolio diversification up to 12 months for funds investing in UCITS-eligible assets and up to 4 years (extendable by one year with CSSF approval) for private investment strategies. Sales documents must now include comprehensive disclosures covering investment policies, subscription and redemption terms, liquidity management tools and risk factors.
Accompanying the Circular is a non-binding compilation of key investment fund concepts, covering investment strategies, methods and subscription/redemption models for funds other than UCITS and money market funds. While not regulatory in nature, it serves as a practical reference for fund managers and the CSSF alike and is particularly relevant ahead of full AIFMD II implementation.
While the Circular does not apply directly to Reserved Alternative Investment Funds (RAIFs), the updated rules for SIFs serve as a benchmark for SIF-like RAIFs particularly regarding risk-spreading and disclosure. RAIF managers may therefore want to consider the Circular’s framework when reviewing their own documentation and investment limits.
The convergence of AIFMD II and Circular 25/901 creates a more detailed and demanding operational environment for Luxembourg-based fund managers. Delegation registers need to be built or expanded. Liquidity management tools need to be selected, documented and operationally tested. Loan origination processes require formalised policies, retention tracking and leverage monitoring. And regulatory reporting infrastructure needs to accommodate significantly more granular data. Even if the reporting deadline itself is April 2027, the data collection starts now.
Managing all of these workstreams simultaneously, while continuing to run day-to-day fund operations, is where the pressure lands for most fund teams. Trustmoore’s fund administration and AIFM/ManCo teams support Luxembourg-domiciled funds across these operational requirements from administration and regulatory reporting to maintaining the governance and compliance frameworks that the updated landscape demands. Our role is to execute and manage the operational processes that allow fund managers to meet their obligations under AIFMD II.
To discuss how these changes affect your fund’s operations, contact one of our teams in Luxembourg.
The transposition deadline is 16 April 2026. Authorities require Member States to comply with AIFMD II by this date, ensuring that all necessary laws, regulations, and administrative provisions are implemented locally. Luxembourg submitted Draft Bill 8628 to Parliament in October 2025. The bill amends the UCI Law and the AIFM Law. Enhanced regulatory reporting obligations apply from 16 April 2027.
Yes. Delegation requirements now extend to fund administration, marketing, loan origination and other Annex I activities, not just portfolio and risk management. AIFMs must maintain detailed oversight registers and report on delegation arrangements from April 2027, including FTE data and due diligence outcomes.
AIFMs managing open-ended AIFs must select at least two liquidity management tools from a harmonised EU list. These options include redemption gates, swing pricing and anti-dilution levies. Luxembourg’s transposition also permits use of additional tools beyond those listed. The redemption policy must align with the liquidity profile of the fund, particularly for open-ended loan-originating AIFs. AIFMs must notify their authorities when activating or deactivating liquidity management tools in a manner not in the ordinary course of business. The RTS were adopted in November 2025; compliance is required from April 2027.
Issued on 19 December 2025, Circular 25/901 consolidates and modernises the regulatory framework for SIFs, SICARs and Part II UCIs in Luxembourg. It introduces differentiated rules on risk-spreading, borrowing limits and disclosure based on investor type, and is accompanied by a non-binding compilation of key investment fund concepts.
Yes. AIFMD II introduces the first EU-wide framework for loan-originating AIFs, including a 5% risk retention requirement, a 20% borrower concentration limit and leverage caps. Loan-originating AIFs must in principle be closed-ended. Luxembourg has opted to prohibit consumer lending within its territory but permits cross-border lending where local law allows.
At least two full-time natural persons domiciled in the EU must conduct the business of the AIFM. For Luxembourg, this formalises existing practice as the CSSF already requires at least two conducting officers, typically resident in or around Luxembourg.
Annex IV reporting becomes significantly more granular, with new data points on delegation arrangements, internal staffing (FTEs), due diligence outcomes and the regulatory status of delegates. These enhanced reporting standards apply from 16 April 2027. ESMA is expected to consult on the related technical standards in H2 2026.
The Circular includes grandfathering provisions, it does not call into question rules already adopted by funds authorised before 19 December 2025. However, documentation for new funds must comply with the updated requirements from that date.
The Circular does not apply directly to Reserved Alternative Investment Funds (RAIFs). However, the updated rules for SIFs serve as a benchmark for SIF-like RAIFs, particularly regarding risk-spreading and disclosure. RAIF managers may want to consider the Circular's framework when reviewing fund documentation and investment limits.
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