LUXEMBOURG Trends and Developments Contributed by: Marcus Peter and Marie-Thérèse Wich, GSK Stockmann SA
Private equity has played an important role within the Luxembourg finance and fund industry in recent years, with Luxembourg becoming more and more attrac - tive for institutional and professional investors. This asset class has recently become accessible to retail investors, to a certain extent via Part II Fund struc - tures but especially through the introduction of the amendments to the the Alternative Investment Fund Managers Directive (AIFMD II), European Long-Term Investment Fund (ELTIF) 2.0, and EU Retail Invest - ment Strategy, together with the modernisation of the Luxembourg fund toolbox. Luxembourg is a well-recognised financial centre and the number one domicile for investment funds within Europe. Sponsors, investment managers and inves - tors from Europe, the USA and Asia use Luxembourg to structure their investments and vehicles. As of end of May 2025, the net assets of regulated Luxembourg investment funds, including alternative investment funds (AIFs) and undertakings for collec - tive investments in transferable securities (UCITS), amounted to more than EUR5,765 billion, which is an increase of 5.35% compared to May 2024. Assets under the management (AuM) of all Luxembourg funds (regulated and unregulated) grew to EUR5.96 trillion by the end of February 2025, which represents a new record. Around a quarter of Luxembourg’s AIF market is made up of private equity funds. This market share is steadily growing; in 2024 in particular, growth in private equity funds of 20% was noted by the Lux - embourg financial supervisory authority ( Commission de Surveillance du Secteur Financier CSSF), such that private equity leads the market share of AIFs in Luxembourg based on the assets under manage - ment (AuM). According to Preqin, Luxembourg is the domicile of 51.5% of all European private equity and venture capital funds. It is expected that private equity will even be the primary driver of growth with regard to managed asset classes from the perspective of Luxembourg alternative investment fund managers (AIFMs) and management companies. One has to be aware that, until around 15 years ago, private equity involved the acquisition of participation in unlisted industry groups, and their development and on-sale
after a few years. However, in the last 15 years, private equity providers have also established other business lines like credit funds, infrastructure funds, real estate funds and other alternative asset classes. Hence, the term “private equity” in a broader sense refers to all these business lines. The Merits of Luxembourg The growth of private equity investments in Luxem - bourg is a consequence of several key advantages of Luxembourg compared to other jurisdictions. Flexible company law and fund structures Luxembourg offers a wide range of fund and company structures to the private equity industry. The flexible company and investment fund laws in Luxembourg allow private equity funds and investments to be structured in accordance with investors’ needs. The most important fund structures (regulated and non- • the investment company in risk capital ( société d’investissement à capital risque SICAR); and • the reserved alternative investment fund (RAIF). All three fund types enable investments in different asset classes like private equity. The SIF, as the standard structure, is authorised and supervised by the Luxembourg financial supervisory authority ( Commission de Surveillance du Secteur Financier CSSF) in the context of private equity invest - ments, in accordance with diversification rules. regulated) for private equity funds are: • the specialised investment fund (SIF); The SICAR is especially intended for private equity investments, as it requires an investment in risk capital. It celebrated its 20th birthday in 2024. The purpose of the SICAR is to collect funds from well- informed investors who are aware of the risks in order to develop the acquired target company. Risk diversi - fication rules do not apply to SICARs. The RAIF is structurally similar to the SIF but is not authorised or supervised by the CSSF. This enables a simplified process and a shorter time to market in comparison with the SIF and SICAR. However, a RAIF needs to appoint a fully authorised AIFM for its super -
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