Luxembourg Investment Funds Law in 2024 and Future Trends for 2025
As we look back on the state of Luxembourg investment funds law in 2024 and anticipate trends for 2025, several key developments and legislative changes have shaped the landscape.
Modernisation of the Investment Funds Toolbox
In 2023, Luxembourg enacted a law to modernise its investment funds toolbox, which came into effect in 2024. This law amended five special laws relating to investment funds and their managers, including:
- The law on Specialised Investment Funds (SIFs)
- The law on Investment Companies in Risk Capital (SICARs)
- The law on Reserved Alternative Investment Funds (RAIFs)
- The law on Undertakings for Collective Investment (UCIs)
- The law on Alternative Investment Fund Managers (AIFMs)
Key changes included:
- Extension of deadlines for reaching minimum capital requirements
- Additional structuring options for UCI Part II funds
- Allowing AIFMs to use tied agents
- Reduction of the minimum investment capital requirement for well-informed investors from EUR 125,000 to EUR 100,000
ELTIF 2.0 Regulation
The ELTIF 2.0 Regulation came into effect on 10 January 2024, enhancing Luxembourg’s position as the preferred domicile for European Long-Term Investment Funds (ELTIFs). This regulation aimed to make private asset alternative structures more accessible to retail investors.
Sustainable Finance Advancements
In 2024, the Luxembourg Green Exchange (LGX) achieved over EUR 1 trillion in green, social, sustainability, and sustainability-linked bonds. Luxembourg maintained its position as the top financial centre for green finance in the EU, according to the Global Green Finance Index.
Trends for 2025
Implementation of AIFMD and UCITS Directive Changes
The new Directive proposing changes to the Alternative Investment Fund Managers Directive (AIFMD) and Undertakings for Collective Investment in Transferable Securities (UCITS) Directive is set to be applicable by 16 April 2026. Key areas of focus include:
- Delegation rules
- Liquidity management
- Loan origination
Digital Operational Resilience Act (DORA)
Firms are preparing for the DORA compliance deadline on 17 January 2025. This regulation aims to strengthen the IT security of financial entities.
Markets in Crypto-Assets (MiCA) Regulation
The implementation of the EU’s MiCA Regulation in 2024 will continue to shape the crypto-asset landscape in 2025.
AI Regulation
The sector must anticipate and adapt to forthcoming regulations on artificial intelligence under the EU AI Act.
Sustainable Finance Evolution
There is an ongoing reassessment of the current situation regarding Environmental, Social, and Governance (ESG) regulations. Potential amendments may ease sustainability-related disclosures and improve transparency for retail investors, possibly including the establishment of an official categorisation system for Articles 8 and 9 funds.
Conclusion
As Europe’s largest fund centre, Luxembourg continues to evolve its regulatory framework to maintain its competitive edge. The ongoing implementation of these regulations and directives will shape the investment funds landscape in 2025 and beyond, with a focus on retailisation, digitalisation, and sustainable finance.
