LUXEMBOURG Law and Practice Contributed by: Claudia Hoffmann, Daniel Krauspenhaar, Stefanie Samosny and Sascha Wiemann, Luther
designating national authorities and setting enforce - ment mechanics under the AI Act. However, in May 2025 the CSSF and the Central Bank of Luxembourg reported in their joint survey on the use of AI in Lux - embourg’s financial sector. They noted growing adop - tion, particularly following the launch of generative AI tools, and confirmed that supervisory monitoring of AI deployment in the financial sector will continue. 3.11 Anticipated Changes for Fund Managers The implementation of AIFMD II into Luxembourg law, along with forthcoming regulations and guidance such as the RTS, represents a significant step in providing a harmonised and transparent framework for loan- originating AIFs across the EEA, and is expected to further boost Luxembourg’s private credit market. Furthermore, the proposed modernisation of the car - ried interest tax regime, if adopted, is expected to fur - ther enhance Luxembourg’s attractiveness for AIFMs, as the draft bill not only expands the scope of eligible beneficiaries but also introduces favourable tax treat - ment, including tax reductions for contractual carried interest and potential full exemptions for participation- linked carried interest. 4. Investors 4.1 Types of Investors in Alternative Funds Luxembourg continues to attract a diverse and global investor base for AIFs, cementing its status as a lead - ing international fund domicile. Institutional investors as well as family offices and high net worth individuals actively invest through Luxembourg structures. Lux - embourg’s robust legal framework, flexible fund tool - box and strong cross-border distribution capabilities make it particularly attractive to both European and non-European investors, with growing interest from Asia, Latin America and the Middle East. Retail par - ticipation is increasingly made via Luxembourg Part II UCIs with ELTIF layers, highlighting the growing suc - cess of ELTIFs for alternative strategies. 4.2 Side Letters Side letters are well established in Luxembourg AIF structures. While permitted in principle, side letters may not undermine the principal of fair and equal
treatment of investors. For AIFs under the scope of the AIFMD, the AIF’s constitutive documents must disclose the types of preferential treatment that may be granted and the criteria for granting it, ensuring transparency for all investors. There is no statutory obligation to grant “most-favoured nation” rights, but such clauses are often negotiated by institutional investors in particular. 4.3 Marketing of Alternative Funds to Investors AIFs can be marketed to different types of investors depending on the AIF regime: • SIFs, SICARs and RAIFs are reserved for well- informed investors; • Part II UCIs and ELTIFs may be marketed to both retail and professional investors; and • unregulated AIFs (such as SCSs/SCSps) have no statutory investor eligibility limitation under Luxem - bourg law, but the EEA AIFM marketing passport may only be used for marketing to professional investors. Luxembourg-based investors can invest in AIFs established in Luxembourg provided they meet the investor eligibility criteria of the relevant fund type. 4.4 Rules Concerning Marketing of Alternative Funds AIFMs marketing or advertising AIFs in Luxembourg must comply with the AIFM Law, applicable EU regu - lations and CSSF guidance. For cross-border market - ing within the EEA, AIFMs may benefit from an EEA marketing passport – this is a passport allocated to AIFMs authorised in the EU enabling them to man - age AIFs and to market these within the EEA, subject to notification requirements. Such notification must include, among other items, details on the AIF, its ser - vice providers and the AIF’s constitutional documen - tation. The CSSF reviews a notification request within 20 working days, and marketing may commence from the date of the positive confirmation by the CSSF. Material changes to the original notification must be reported at least one month in advance or, in the case of unplanned changes, immediately after these have occurred. Ongoing obligations include contin -
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