LUXEMBOURG Trends and Developments Contributed by: Claudia Hoffmann, Daniel Krauspenhaar, Stefanie Samosny and Sascha Wiemann, Luther
Luther Aerogolf Center – 1B, Heienhaff Senningerberg L-1736 Senningerberg Luxembourg Tel: +352 27484 1 Fax: +352 27484 690 Email: luxembourg@luther-lawfirm.com Web: www.luther-lawfirm.lu
Loan Origination Funds A key objective of the Capital Markets Union, as out - lined in the Commission’s Communication of 24 Sep - tember 2020, A Capital Markets Union for people and businesses – new action plan , is to improve access to financing for companies across the European Union (EU), in particular for small and medium-sized enterprises (SMEs). Since SMEs often face structural challenges in obtaining credits from traditional bank - ing channels, alternative sources of financing have become increasingly important. In this context, alternative investment funds (AIFs) that engage in loan origination can play a vital role by providing fresh capital to the real economy. However, the absence of harmonised rules and the coexistence of diverging national regulatory regimes have led to supervisory arbitrage, fragmented markets, and vary - ing levels of investor protection. This fragmentation has hindered the development of an efficient internal market for loan origination by AIFs. The European Commission has therefore set the objective of strengthening the Capital Markets Union by creating an efficient internal market for loan origina - tion by AIFs, ensuring a uniform level of investor pro - tection across the Union, and allowing AIFs to expand their activities consistently across EU member states. To achieve this, the revision of Directive 2011/61/EU by Directive (EU) 2024/927 of the European Parliament and of the Council of 13 March 2024 (AIFMD II) for - mally recognises the right of AIFs to grant loans while introducing harmonised rules to foster cross-border activity and improve access to finance for Union com - panies.
AIFMD II establishes, for the first time, a dedicated European framework for loan-originating AIFs. This provides legal certainty and a harmonised basis for private credit funds across the EU. The new regime expressly recognises both open-ended and closed- ended loan-originating strategies, and sets out clear parameters for their operation, thereby facilitating access to this asset class in a regulated environment, which is expected to further boost Luxembourg’s private credit space. In particular, AIFMD II sets out clear guidance as to leverage restrictions, the prohibi - tion of “originate-to-distribute” strategies, risk reten - tion requirements, and provisions to limit conflicts of interest. Furthermore, it is clarified that open-ended loan-originating AIFs should at least select two liquid - ity management tools appropriate for their purposes, to demonstrate that their liquidity risk management system is compatible with their investment strategy and redemption policy. As mandated by AIFMD II, the European Securities and Markets Authority (ESMA) developed regulatory technical standards for deter - mining the requirements with which loan-originating AIFs must comply to maintain an open-ended struc - ture (RTS), which further enhances predictability for market participants. According to the RTS published by ESMA on 21 October 2025 (which are still subject to endorsement by the European Commission), for each open-ended loan-originating AIF it manages, an AIFM must: • define an appropriate redemption policy; • ensure that the open-ended loan-originating AIF has sufficient liquidity to comply with redemption requests;
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