Luxembourg Financial Regulator Circular on rules applicable to SIF, SICAR and UCI Part II

On 19 December 2025, the CSSF published new circular CSSF 25/901 (Circular), together with a compilation of key concepts and terms used in the field of alternative investment funds (Compilation).

 

Who is impacted?

The Circular impacts funds or compartments authorised in Luxembourg as SIFs, SICARs or UCIs Part II from 19 December 2025. Funds or compartments authorised by the CSSF before that date are not required to comply with the new standards set out in the Circular.

While the Compilation provides a common understanding of certain key concepts used in the context of private investments such as types of investment strategies or of financings, in particular for use in communications with the CSSF, the Compilation is not a regulation and is solely for informative purposes.

 

What changes?

While the Circular restates some existing concepts with greater detail and further clarity, such as "risk capital", it also implements certain changes:

1. Risk diversification

SIF and UCI Part II which invest their assets following a "risk-spreading" approach, must abide by, among other things, the following diversification rules:

• for funds or compartments marketed to unsophisticated retail investors, a 25% diversification rule applies (i.e., no more than 25% of their assets or commitments to subscribe are invested in a single asset or a single issuer), raised to 50% if investing in an infrastructure investment and borrowing for investment purposes is limited to 70% of the assets or commitments to subscribe of the fund or compartment; and

• for funds or compartments marketed to well-informed investors and/or professional investors, a 50% diversification rule applies, raised to 70% if investing in an infrastructure investment.

Derogations may be granted by the CSSF on a case-by-case basis. Any ramp-up or wind-down period, during which those rules may not apply, must be expressly provided for in the fund documentation. In principle, the ramp-up period should not exceed four years for funds making private investments.

An important point is that funds or compartments which are out of scope of the Circular (such as existing funds and compartments) must still comply with investment restrictions laid down in their documentation, even if stricter than the new diversification rules described above.

2. Transparency

In terms of transparency, in addition to any disclosures made pursuant to Article 23 of Directive 2011/61/EU (AIFMD) – and thus, particularly relevant for SIFs or SICARs managed by a registered alternative investment fund manager, not authorised and not otherwise subject to AIFMD – the fund documentation must include the following information:

• a description of the investment policy including, as newly defined in the Compilation,

  (i) the investment objectives and strategies,

  (ii) the portfolio composition including the target asset classes and specific disclosures where the fund or compartment intends to invest in UCIs or other investment vehicles,

  (iii) the investment restrictions including their calculation basis and maximum borrowing limit,

  (iv) the investment methods and (v) techniques which may be used and

  (vi) the targeted investment horizons;

• a description of risks and potential conflicts associated with the contemplated investments;

• the manner in which the proceeds will be distributed;

• the terms and conditions for subscription as well as redemptions, together with a brief description of the liquidity management tools available to the managers including their functioning and conditions for their activation;

• specific warnings to unsophisticated retail investors with respect to the high level or risks associated with private investments as well as the closed-ended nature of the fund, if applicable; and

• a description of the procedure to amend the investment policy or make another material change. In this regard, please note that the CSSF may request that the procedure includes a notice period with a free-of-charge redemption option.

3. Duration

Finally, the Circular provides that the term of a fund or compartment for a SIF, SICAR or UCI Part II may be extended by one year up to a maximum of three times, if so provided in the fund documentation. Derogations may be granted by the CSSF on a duly motivated basis only.

 

What impact for RAIFs?

RAIFs are out of scope of this new Circular as they are not supervised by the CSSF. Nevertheless, in accordance with the parliamentary documents of the RAIF law, RAIFs have always applied the concept of "risk spreading" for the SIF-like RAIF in line with the framework developed by the CSSF for SIFs (and in particular, circular CSSF 07/309) and the concept of "risk capital" for the SICAR-like RAIF in line with the framework developed by the CSSF for SICARs (and in particular, circular CSSF 06/241).

As a result, the new Circular should also influence RAIFs so that the concepts of "risk spreading" and "risk capital" remain aligned with the framework for SIFs and SICARs, respectively. Indeed, it is our view that there is no intention to change the market approach being pursued since 2016 where RAIFs replicate the SIF/SICAR framework.

 

How Can DLA Piper Assist?

Our team is available to assist with any matters relating to the launch (or restructuring) of any new fund or compartment in the context of the Circular and to answer any questions you may have. Please feel free to reach out to any of the DLA Piper contacts listed below for further information.